Grass still greener in Perth
A shining light for investment
The Western Australian Government’s handling of the COVID-19 crisis may prove to be a shining light guiding foreign investment back to residential real estate, according to Finbar Chief Operations Officer Ronald Chan.
“Our government’s handling of the pandemic situation has only reinforced the benefit of investing in WA,” he said. “We need to remember overseas buyers come mostly from South East Asia, and buying property is still related to education for their children,” he said.
“The weak dollar and our already affordable prices are already a drawcard, with our geographic isolation increasingly being seen as an advantage.”
Mr Chan said he believed overseas buyers would be assessing their investment choices closely at the moment.
“Off-the-plan projects that are due to be completed in two to three years will be on top of the list,” he said.
While he said investment was down due, at least in part, to the introduction of the State Government’s Foreign Buyer Duty in January last year, Mr Chan believed buyer interest was on the rise.
“Our analytics have shown an increase in traffic to our websites from overseas since mid-March,” he said.
“We have achieved three Foreign Investment Review Board (FIRB) sales from countries including China and Singapore this year, verses six at the same time last year.
“Since the introduction of the foreign buyers duty, we have seen a drop of up to 80 per cent in foreign buyers.
“The foreign surcharge needs to be reconsidered by the State Government to help our local property market recover.
“If this is removed, we will see an increase in investments that will benefit the property market and the construction sector, which will boost jobs growth and contribute to the health of the WA economy.”
According to the FIRB’s Annual Report for 2018/19, the Australian Taxation Office completed 1068 residential real estate investigations last financial year, identifying 600 properties that were in breach – equal to those identified in 2017-18.
The report also noted there were 7513 proposed investment approvals in residential real estate, a drop of 2523 from 2017-18.
Despite this fall, the total value of residential real estate approvals rose by $2.3 billion to $14.8 billion, however, this still represented a significant drop from the peak in 2015-16, when that figure stood at $72.4 billion.
The FIRB report floated a range of possible reasons for the foreign buyer dip nationwide, including foreign investment application fees, a tightening of domestic credit and increased restrictions on capital transfers in home countries, state taxes and foreign resident stamp duty increases and the introduction of an exemption certificate so only one approval is required for individuals considering a number of residential properties with the intention to purchase only one property.
Victoria had the lion’s share of residential foreign real estate approvals in 2018-19 , according to the report, with 42 per cent. Queensland and New South Wales came in joint second with 18 per cent, followed by WA at nine per cent, with 657 approvals.
Despite these figures, Ray White Dalkeith Claremont Principal and Director Vivien Yap said recent signs were encouraging in terms of overseas buyers in the Perth market.
“We are getting a lot of enquires,” she said. “Buyers realise WA is a safe haven and we have never had the strong rise and big falls in the market, so it is really stable place to come back to.
“They are confident with the low infections of COVID-19, and so based on that they are very comfortable purchasing the property sight-unseen.”
Ms Yap said low currency and interest rates were enticing propositions, though the extra charges related to FIRB application fees and stamp duty could make it difficult for foreign buyers.
“It does make it very difficult for foreign buyers, who have to pay all these extra costs to purchase,” she said.
Recent changes to the FIRB investment framework might prove another hurdle to foreign investors, with the board’s decision period on purchases extended from 30 days to six months in response to the COVID-19 pandemic.