Foreign investment tumbles in Australian residential real estate

The number of approvals for foreign purchases of residential property fell in the first quarter of FY24, according to the latest statistics released by the Foreign Investment Review Board (FIRB). China remains our biggest source of residential investment, followed by India and Hong Kong.

The FIRB approved 1,374 applications from foreign residents to buy residential real estate between 1 July and 30 September 2023 (1Q FY24). This represented $1.5 billion in investment. This is significantly lower than the previous quarter and is tracking well below the rate of investment in 2023. Between 1 April and 30 June 2023 (4Q FY23), the FIRB approved 1,932 applications worth $2.4 billion. For the full financial year of 2023, 6,576 proposals were approved, thereby averaging 1,644 per quarter.

In 1Q FY24, China was the largest source of approved residential real estate investment with 523 approvals worth $700 million. Making up the top three were India with 148 approvals worth $100 million, and Hong Kong with 111 approvals also worth $100 million.

The fall comes amid the Federal Treasurer Jim Chalmers introducing legislation into the Parliament earlier this month to significantly raise foreign investment application fees, as per his announcement in the Mid-Year Economic and Fiscal Outlook. Currently, foreign investment application fees start at $14,100 for purchases of residential property worth $1 million or less, and rise to a maximum of $1,119,100 for acquisitions worth more than $40 million.

The Albanese Government wants to triple the fees for the purchase of established homes, which foreigners are allowed to buy if they are living in Australia to work or study, and must sell when they leave. Dr Chalmers explained that the government hopes this will encourage foreigners to buy new property instead. “This will help create additional housing stock, jobs in the construction industry and support economic growth,” he said.

The government also wants to double the vacancy fee charged to foreign owners whose properties are not genuinely occupied as a residence either by themselves or a relative, and are not rented out on a lease term of more than 30 days for at least six months of the year. The vacancy fee is the same as the applicable application fee in each case, hence $14,100 on properties purchased for $1 million or less.

On Census night 2021, more than one million homes in Australia were unoccupied, which created fierce national debate about home ownership affordability and rental supply for Australians. “The increased vacancy fees will encourage foreign investors to make their unused properties available to renters,” Dr Chalmers said. The government is also proposing a reduction in application fees for build-to-rent projects to encourage more foreign investment in this emerging real estate sector.

“Higher fees for the purchase of established homes and increased penalties for those that leave properties vacant will help ensure foreign investment in residential property is in our national interest,” Dr Chalmers said.

FIRB application fees were first introduced in 2015. They are indexed to annual inflation but have been increased markedly several times by governments in response to public discourse over the impact of foreign investment on rising property prices. Real estate industry insiders say rising fees are dissuading some foreign nationals from investing here.

Australia’s housing debate is often dominated by affordability and supply, but a new collaboration between Brickworks and acclaimed architecture firm Kennedy Nolan argues the conversation should also focus on the quality and longevity of the homes being built.

The project, titled Our Next Neighbourhood, examines how suburban housing could evolve in response to shrinking block sizes, rising energy costs, increasing density and changing family structures.

Rather than proposing luxury dream homes, the initiative focuses on what its creators describe as achievable suburban housing models that are more flexible, sustainable, and better suited to modern Australian life.

Brickworks commissioned Kennedy Nolan to investigate what suburban housing might look like if “design, long-term liveability and enduring materials were placed at the centre of the conversation”.

The result is two housing concepts, known as the Street Terrace and Canopy Terrace, which explore higher-density living while maintaining access to green space, natural light and privacy.

The designs incorporate adaptable floorplans that can evolve as family needs change, along with passive design principles intended to reduce reliance on mechanical heating and cooling.

Brett Ward, General Manager of Marketing at Brickworks, said the company wanted to broaden the discussion around housing beyond simply increasing supply.

“Much of the housing conversation today is understandably focused on supply and affordability, but there is an equally important discussion to be had about the quality and longevity of the homes we build,” he said.

“We wanted to explore how thoughtful design, combined with durable, resilient materials, could create homes that not only function well today, but continue to support Australian families and communities long into the future.”

Kennedy Nolan said the project was partly inspired by concerns that contemporary housing often struggles to adapt to changing household structures and environmental pressures.

The architects said innovation in suburban housing was “essential” to address changing family groupings, energy use, urban heat island effects and growing disconnection from place.

According to the design team, the concepts draw on lessons from some of Australia’s most influential housing projects while seeking to create neighbourhoods with stronger links to landscape, community and local identity.

Rachel Nolan, founder of Kennedy Nolan, said the practice saw an opportunity to reimagine suburban housing as something “more connected to our climate, our landscape, our communities and our Australian identity”.

The project comes as policymakers, developers and planners continue searching for ways to deliver more housing without sacrificing liveability, neighbourhood character or long-term sustainability.

Foreign investment tumbles in Australian residential real estate

China was the largest source of approved residential real estate investment in the past quarter

Brickworks has enlisted acclaimed architecture studio Kennedy Nolan to explore how homes could become more adaptable, energy-efficient and connected to community.