Australia has always been a popular place for foreign investors looking to invest in the property market, particularly with Asian countries like China. The Foreign Investment Review Board (FIRB) found that Chinese buyers in Australia were approved to purchase $23.8bn of property in 2015-2016, an increase from $18.4bn in 2014-2015. Australia received the second largest share of outflowing capital from China after the United States.
Despite the regulatory restrictions, and the banks’ new curbs on lending to foreign property investors, many foreign investors remain undaunted when it comes to purchasing property in Australia.
Luckily for them, there are options outside of the banks to obtain finance for the purchase of property. While banks are primarily concerned with serviceability and proof of income, private mortgage lenders like Private Mortgages Australia approach the lending process quite differently. Usually the loan is secured by property equity so as long as a foreign borrower has property assets to use as collateral the lending process should go smoothly.
One space that is of particular interest to foreign investors is the commercial property market. There are many reasons for the growth in this sector, starting with the types of investors:
Two types of foreign investors
There are two main types of investors who are interested in Australian commercial property – corporate and institutional investors, or high net worth individuals. Each of these investors has different motivations for choosing to invest in Australia, as well as a varied perspective on what they hope to achieve from their investment.
Corporate or institutional investors choose to invest offshore for two main reasons. The first is the mandate to deploy large funds, and with many domestic markets slowing, this has driven them to look overseas. The second is to keep their investment assets diverse and spread out over markets and cities that are seen to be well supported by demand, with survival possible even in the event of a global downturn. These markets mainly include Australia, the USA and the UK. Further to that, the top tier cities are seen as the lowest risk and best understood and therefore are the main focal point of investment. These cities include San Francisco, New York, London, Sydney and Melbourne.
The second type of investors – those with a high net worth – are commonly seen to be motivated to invest for migration purposes. As with corporate investors, the places high net worth investors choose to invest are within the tier one cities. The reason for this is mainly due to the cycle of popularity of these cities. Investors with a high net worth choose to migrate to these regions, driving corporate investors to strategically target these cities as their buyers are planning on moving there.
Getting a piece of the foreign pie
With continued interest in Australia from foreign investors, brokers have an opportunity to assist them in accessing funding for property purchases. According to Juwai.com’s March Chinese Consumer Survey, 25% of respondents cited financing or transferring money to pay for overseas property as being difficult. By working with non-bank lenders like PMA, brokers can help foreign clients access cost-effective loans with quick turn-arounds and in the meantime earn a slice of the lucrative foreign investor pie.
Private Mortgages Australia is able to lend to foreign investors when they are borrowing using an established Australian company.