The Impact of Overseas Investors

It’s time for the general public, fuelled by the news media to accept that foreign investment is crucial to maintain and improve upon the state of the Australian investment market.
It’s not a perfect system, and I’m first to admit that it would be much better if everyone could still afford to purchase a home without having to take on a debt that they will likely never be able to repay.
But we can’t have it both ways.
Property markets don’t remain static, they are either increasing or decreasing and as we all experienced during the GFC, the impact of a decreasing property market is felt further than property investors and homeowners. There are major flow-on effects including a reduction in consumer confidence and spending, which results in slowed growth. In Australia we were shielded from this to a certain extent — as has been explained many times — by the mining boom which was still in full flight, but we will also well-positioned to respond due to high levels of foreign investment, most specifically from China.
This Chinese investment served to create a buffer, a more favourable ratio of foreign investment to local investment. The impact of this was that other countries had a vested interest in ensuring Australia responded well to the financial crisis. China kept purchasing coal it didn’t need to make sure that our economy would remain — by global comparison — incredibly strong.
Importantly, real estate (even in Sydney) remains affordable by global standards. Purchasing anything in Beijing is now almost impossible, especially if you want something that a human being could actually live in. By comparison, Australian prices offer a two-pronged benefit — firstly, they present the chance to enter the market using less capital, but they also allow investors to create a financial hedge. Through investing in a foreign country, should a regional crisis take place in mainland Asia, investors will theoretically be sheltered to a certain extent, although there are likely to be significant ramifications for Australia in the event of a Chinese crisis. This hedge also offers a hedge to the Australian market. At the moment, foreign investment makes up only around 15% of overall property investment in Australia. This is a healthy and sustainable percentage which can easily stretch slightly higher or lower without any significant ramifications.
The main thing is that Australia is well-positioned to face an uncertain future with global partners choosing to invest in our country.

 

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