Australia reported a drop of 67% in residential real estate approvals last financial year, according to the latest annual report from the Foreign Investment Review Board (FIRB).
The reason? The slowdown in Australian housing markets, stricter lending restrictions and higher fees for overseas buyers are among the factors, say experts.
The number of FIRB approved applications from overseas buyers for purchasing residential properties dropped to 13,198 last financial year, down from 40,149 in fiscal 2016. The value of FIRB approvals also plunged, from AU$72.4 billion (US$55.32 billion) in fiscal 2016 to $25.2 billion (US$19.26 billion) in fiscal 2017.
However the FIRB noted that a significant factor contributing to the reduction in approvals was the introduction of application fees from December 2015.
“The introduction of fees resulted in investors only applying for properties they intend to purchase,” the report said.
“Prior to the introduction of fees, individuals often made several applications earlier in the process when considering multiple properties, even though they might have only ended up purchasing a single property.
“This suggests that the resulting reduction in approvals may not imply a corresponding a reduction in actual investment in residential real estate. That is, the actual decline is likely to be lower than implied by the data.”
However the FIRB fees are not the only changes. Several Australian states have independently introduced taxes on foreign buyers. Besides, the number of Chinese buyers has dropped significantly due to capital outflow restrictions imposed by the government in China.
Australian banks have also imposed several restrictions on lending to investors. Lending to housing investors dripped 9% in seasonally adjusted terms to $10.88 billion in March, the smallest monthly total since January 2016. In percentage terms, this was the largest monthly decline since September 2015.