Foreign Buyer Activity Aids Construction Boom in Australia

co-workers talking at construction site with bulldozer behind themAustralia’s home construction boom has occurred thanks in part to foreign investment activity between 2015 and 2016, according to an ANZ study.

Researchers noted that overseas buyers accounted for up to 60,000 housing deals in the country, or 13 percent of all transactions, during the period. Some of them may have acquired properties with the intention of renting them out, which will likely be a trend in the next five years.

Driving Factors

ANZ senior economist Daniel Gradwell considers foreign investments to be a major growth catalyst for the overall housing market. In case demand from abroad dwindles, the industry will likely notice a significant decline in pipeline projects.

Sale prices may also drop in the future, if most foreigners pull out their investments in the market, according to Gradwell. Foreign ownership only accounts up to 4 percent of total housing stock in Australia. For now, the construction boom benefits not just homebuilders, but also businesses such as those that provide concrete tools and supplies. This may continue due to increasing popularity of build-to-rent homes.

More Renters

Adam Hirst, Mirvac general manager capital allocation, attributed the surge of build-to-rent homes to shifting tastes of Australians. More millennials, young families and downsizers prefer to lease properties, instead of buying one.

For 2017, millennials became the biggest reason for the increase in built-to-rent homes, according to Richard Brice, Ernst & Young Australia director of real estate advisory services. They accounted for almost all of Australians that rent houses in the country. Proximity to their jobs, basic facilities and services served as their main reason for renting homes, although high prices may be deterring them to purchase their property.

Conclusion

While foreigners still account for a portion of housing transactions in Australia, an expected increase in renters may indicate that prices may lead some people to forego a home purchase.