Australia approved a record A$24.9 billion ($23 billion) of home purchases by foreign buyers in the nine months to March 31, a 93 percent jump from the same period a year earlier, UBS AG said.
Overseas investment in housing in Australia is now 13 percent of total turnover, compared with a trend of 8 percent, UBS economists Scott Haslem and George Tharenou wrote in a report dated June 27. About 78 percent of purchases were of new properties, they said.
The Australian parliament is conducting an inquiry into foreign buying of domestic real estate amid concerns that overseas demand is pushing up prices and making housing unaffordable for local buyers. Dwelling prices climbed 10.7 percent across Australia’s eight state and territory capitals to a median A$545,000 in the 12 months to May 31, according to the RP Data-Rismark home value index, amid interest rates at a record low 2.5 percent.
“Foreign demand rose despite a relatively expensive valuation and Australian dollar,” Haslem and Tharenou wrote in the UBS report. “We see a likely ongoing long-term uptrend of foreign investment in housing,” which supports the bank’s forecast of a 7 percent increase in prices this year, they said.
Australia’s rising home prices pose some medium-term risks to the nation’s economy, with the housing market facing a possible “correction,” Steven Hess, senior vice president for sovereign risk at Moody’s Investors Service, said in a statement last week.
While approvals for foreigners to buy housing in Australia are rising, the nation’s climbing prices are largely a result of domestic demand and a lag in supply, Christopher Kent, the assistant governor of the Reserve Bank of Australia, said at a hearing held as part of the housing inquiry last week.
Australia tightened rules on foreign investment in real estate in 2010, requiring offshore buyers to purchase only new properties, and introduced penalties to enforce the changes. The government has also said temporary residents must obtain approval from the Foreign Investment Review Board to buy homes, and must sell when leaving the country.
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