SINGAPORE: Australian real estate may present a good investment opportunity next year. A robust economy and a growing shortage of homes are helping to lift prices.
Analysts say that foreigners will be drawn to the market, with Chinese, Singaporean and Malaysian buyers continuing to lead demand.
Despite new regulations targeted at foreign buyers of Australian properties, Asian investors are still snapping up homes Down Under, especially in major cities such as Sydney and Melbourne.
An inner city one-bedroom home in Sydney currently commands up to A$750,000. But with prices in the two cities reaching record levels, analysts say Brisbane is an up-and-coming location for foreign home buyers because it is relatively cheaper.
Julian Sedgwick, senior associate director, International Residential Sales, Savills, said: “Foreigners do have restrictions of buying in Australia where they can buy any property, but when it comes to selling, they do have to sell to Australian nationals – but this doesn’t seem to affect people.
“There are high volumes of buyers coming into the market. We have launched two or three schemes in Sydney in the last few months – one where we have had 800 enquiries in a weekend, sold 25 per cent to the first financing stage in Sydney in two days. Our Sydney office has basically said about 10 to 15 per cent of those were Asian buyers.”
Prices of Australian homes have risen 56 per cent in the past 10 years. Yet the Housing Industry Association estimates that price-to-income ratio is slightly lower today than it was in December 2007.
To ward off the threat of asset bubbles, Australian policy makers raised interest rates to 4.75 per cent last month. But analysts say this will not deter Asian investors.
Singaporeans, for example, can finance their Australian properties with loans pegged to a lower interest rate.
Donna Lim, head of Overseas Projects, HSR International Realtors, said: “Rental yields … for CBD apartments – you probably would be able to get 6 to 7 per cent; for houses in the suburbs – you will probably enjoy 5 per cent rental returns.
“We can actually borrow in Sing dollars, so as a result our interest rate is about 1-and-a-half to 2 per cent. So if you imagine your rental yield is 5 per cent, for example, you only pay 2 per cent interest. So there’s definitely a positive cash flow there.”
Due to high foreign demand and a lack of new housing supply in key Australian cities, market watchers expect property prices to rise as much as 8 per cent in 2011.
An index of home prices in Australia’s eight capital cities was 5.7 per cent higher in the three months ended September 2010, compared with the final quarter of 2009.
Source: – CNA/al
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