Foreign buyers drive constructio

Foreign buyers bought as much as 25 per cent of new homes in 2015-16, making them a key driver in the country’s residential construction sector, according to the ANZ. Foreign buyers bought as much as 25 per cent of new homes in 2015-16, making them a key driver in the country’s residential construction sector, according to the ANZ.

The extended analysis by ANZ extrapolates on official figures to assess the impact of foreign buyers on both the stock of homes and on new housing.

Not all approvals for foreign buyers translate into purchases. The ANZ assumed that 30 per cent to 50 per cent of approvals resulted in a purchase.

With that assumption, it is estimated foreign investors purchased between 35,000 and 60,000 dwellings in 2015-16, according to the ANZ research piece,

Foreign Buyers of Australian Property – How many are there?

That meant foreign buyers account for only a small share of total housing turnover for the year, between 7 per cent and 13 per cent.

Their impact in the residential construction sector is much greater, taking up a share between 15 per cent and 25 per cent of newly constructed dwellings.

‘‘Foreign demand is clearly one of the drivers of the strength in our dwelling investment profile,’’ senior economist Daniel Gradwell wrote.

‘‘If this demand were to dry up suddenly, Australia’s construction pipeline would likely be notably weaker than currently expected.’’

On ANZ’s estimate, foreign buyers bought between 30,000 and 50,000 new dwellings in 2015-16.

The bulk of that activity in new housing was in Victoria. In that state foreigners purchased between 13,000 and 20,000 new dwellings, representing 25 per cent to 35 per cent of total new builds in the year. The market share was higher in Queensland, at 25 per cent to 45 per cent of new dwellings, and lower in New South Wales, at 15 per cent to 20 per cent.

In October, Credit Suisse analysts estimated foreign buyers, almost all of them Chinese, were buying the equivalent of 25 per cent of new housing supply in NSW, undeterred by local taxes or investment limits imposed in China.

Drilling down further, ANZ’s Mr Gradwell surmised that around 80 per cent of foreign purchases are apartments and the rest are houses.

By applying that split to housing prices, the ANZ estimated that the average price of a foreign purchase was $620,000 nationwide for 2015-16.

‘‘The sizeable foreign-buyer share of newly constructed housing implies that foreign demand has been an important contributor to Australia’s recent construction boom,’’ he wrote.

‘‘But the relatively lower share of total market activity suggests that foreign buyers have not been the primary driver of the price growth.’’

On ANZ’s reckoning, foreigners now own about 2.5 per cent to 4 per cent of Australia’s housing stock. In contrast, around 5 per cent of housing stock is bought and sold each year.

‘‘This means that only a large shock, causing a high share of foreign owners to sell their Australian property, would be significant enough to drive sale prices lower,’’ Mr Gradwell wrote.

‘‘Foreign buyers have supported dwelling investment through the current cycle, but have not been the main cause of the rapid price growth and are unlikely to be the cause of a sharp price correction.’’