Are Foreign Investors Overheating Sydney’s Property Market?

Monday, May 11th, 2015
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The immense popularity of Sydney with overseas property investors threatens to further overheat its real estate market as the RBA continues to trim rates.

Sydney has emerged as one of the most popular cities in the world amongst international property investors according to the results of a new global real estate survey.

CBRE’s Global Investor Intentions Survey 2015 lists Sydney as Australia’s most attractive destination for offshore real estate investors, and behind only London, Tokyo and San Francisco among global cities.

According to CBRE national director of capital markets Josh Cullen, Sydney’s popularity amongst international property investors is due to the strong returns that Australian real estate offers across all core sectors.

Cullen said there are already signs that office property in Australia’s downtown areas is set to enjoy a strong performance in the near-term.

The survey of over 700 real estate investors found that overseas spending is likely to remain strong this year, with 53 per cent of respondents planning to expand acquisitions in 2015.

Interest in cross-border acquisition is also on the rise, with the proportion of investors intent on buying property abroad leaping from 28 per cent in 2014 to 38 per cent this year.

Sydney’s enduring popularity with cash-ready foreign investors could contribute significantly to the overheating of its property market – particularly in the wake of the latest rate cut unveiled by the RBA, serving to further squeeze first time homebuyers.

Ever since the cut implemented in February that took interest rates to 2.25 per cent, auction clearance rates in Sydney have remained above the 80 per cent threshold week after week.

Members of the property sector have complained that the latest rate cut is unnecessary, and could cause Sydney’s real estate market to overheat.

Malcolm Gunning, president of the Real Estate Institute of New South Wales, went as far as saying that the latest rate could result in an exodus of young people from Sydney due to the increasing unaffordability of housing.

Gunning said that the housing situation in Sydney is causing many of the city’s “best and brightest” to leave, leading to a dearth of key personnel in areas including law enforcement, education and healthcare.

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