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Why Brisbane is hot property at the moment

A little less cosmopolitan, a little less youthful than its southern neighbours but 'Brissy' is far sunnier and growing hotter as an investment destination

Streets Beach, a manmade beach in Brisbane's inner city. Martin Valigursky/Shutterstock[/caption]

Last week, Brisbane set a record in residential property with the sale of a Kangaroo Point mansion for AUD18.48 million (USD14.28 million). The transaction surpasses the 2014 sale of an Aaron Avenue home to Gina Rinehart, the richest person in Australia, for AUD14 million.

The high-end Brisbane residential market has indeed seen a positive shift toward the end of last year, according to Ray White New Farm, which brokered the latter sale. Indeed, Brisbane registered a record number of transactions in homes above the AUD5-million threshold in 2016.

Asians in particular are waxing zealous for Brisbane, the third most searched state capital in Australia on Chinese property portal Juwai.com showed. Demand for Brisbane homes from international investors stem the most from China, followed by the United States, New Zealand and England, according to the Real Estate Institute of Queensland (REIQ).

“We see the gap between Sydney and Melbourne closing in the next couple of years," said Patrick Hunt, manager at local property titan Indigo Building Group. The northern migration from an investment point of view continues."

Brisbane enjoys far less volatility than Gold Coast, Queensland's other large metropolis. “Gold Coast tends to suffer from a boom-bust cycle more so than Brisbane,” Hunt added.

[caption id="attachment_61932" align="aligncenter" width="1000"] Winter Festival in Brisbane's King George Square. Martin Valigursky/Shutterstock[/caption]

Next to the frothy markets in New South Wales and Victoria, Brisbane's affordability has resonated with offshore investors. For perspective, the median house price in Sydney stands at AUD867,000, while that of Brisbane is AUD635,000, per REIQ data.

“People can't afford the yield that they're looking for in other cities; their returns aren't there,” said Mitch Koper, media manager at property analytics firm CoreLogic.com.au. “In Brisbane, you can buy a house for AUD600,000 and get a return of 7 or 8 percent in some cases. It's a very reasonably priced market.”

For all its lure, however, Brisbane has posed challenges to enthusiasm among international investors of late. In June, the Queensland government levied a 3 percent surcharge on foreign purchases.

More: Are Asian home buyers facing racist backlash in Australia?

Then there are more inherent challenges. Although it boasts more sunny days than the more ephemeral climes of its southern neighbours, ‘Brissy' still somehow lacks the sophistication of the south. “I moved to Sydney because Brisbane is so laidback,” said Mark Mitchell, a Filipino-Australian systems analyst. “Brisbane is a place to retire, a good place if you are old, although it does have a man-made beach in the City at Southbank.”

“What I hate about Brisbane is that it’s too small. Everyone knows each other, a bit racist,” said Angie, a Vietnamese makeup artist who married to a Greek in Brisbane. “Clubs ain’t that great, and there are not that many events like in Melbourne.

“Also, sh*t coffees.”

Read next: Has Australia had enough of Asian buyers?

 

Has Australia had enough of Asian buyers?

Asians love to buy into the lifestyle down under, but there are clouds on the horizon

Long a magnet for Asian investors, Australia's cities offer fantastic lifestyle benefits[/caption]

By Elisabeth Knowles

It’s easy to understand why investors are attracted to Australia. The cities are cosmopolitan, uncrowded, multicultural and predominantly coastal. It is also one of the most attractive countries for Asian migrants due to its temperate climate and the promise of an easy lifestyle transition.

Asian communities abound in Australia’s cities, prompting top American-Chinese comedienne Margaret Cho to note on a television current affairs show that Australia is “so Asian!” Chinatowns are established in each capital city, and increasingly in suburban centres, with abundant restaurants, Asian grocers, and late-night dumpling bars.

Then there’s the sense of community – clusters of Chinese migrants, for example, are drawn to affluent, leafy areas such as Chatswood in Sydney’s north and Box Hill in Melbourne’s eastern suburbs, where houses and land sizes are large and construction standards high.

More: 88 million ways Chinese investors saw luck in this Sydney property

Even for those not thinking of making a move Down Under, a thriving rental market and high demand for luxury property means buying property in Australia is unlikely to be a misstep.

[pullquote]You go and ask a lot of people in Sydney, at Hurstville or some of the other suburbs. They feel they have been swamped by Asians[/pullquote]

In Sydney and Melbourne, there’s an almost-guaranteed return on investment. Record low interest rates have seen more Australians investing in real estate – a growth of almost 10 percent in 2015. Sydney’s real estate boom has seen many owners become millionaires in recent years, and Melbourne isn’t far behind.

Over the past four years, house-price growth in Sydney has risen by about 57 percent and almost 40 per cent in Melbourne. Many pundits see the property boom as a bubble that must eventually burst – and soon.

More: This is why the Chinese are beating Australians at their own auctions

The Paris-based Organisation for Economic Co-operation and Development warned in June of a “dramatic and destabilising” end to Australia’s housing boom. The assertion was backed by a rise in the number of new apartments, suggesting possible oversupply, and instability following recent inconclusive Federal elections.

Charles Pittar, CEO of Juwai.com, the Chinese international property portal, has his own interpretation of the report, however.



“The OECD report actually predicts that output growth will strengthen towards three percent next year, economic growth will pick up and inflation will fall, he says. “The report also describes ‘receding risks from the housing boom’, but does not predict a ‘dramatic and destabilising end’. It merely says there is always a chance their analysis is incorrect and – in that case – there could be such an outcome. To call that a prediction is a mistake.”

More: Chinese billionaire snaps up Aussie trophy home for USD50 million

Asian investment is one of the largest contributing factors to Australia’s real estate boom, be it industrial and office space or high-end luxury residential stock.

“Australia is still the number two destination for Chinese investment in the world,” adds Pittar. “The fact that the Australian dollar is still relatively low against the Chinese renminbi, the high quality of life and the appeal of an Australian education all support demand.”

[pullquote]Australia trades heavily off a reputation as a highly transparent, well-regulated real estate market underpinned by a sophisticated legal system and a stable economic environment[/pullquote]

Most offshore investors generally buy either for investment or to house a child looking to study in Australia, although property acquisitions are increasingly being driven by lifestyle opportunities, according to Nerida Conisbee, chief economist for the REA Group, a digital advertising company that operates Australian property websites.

More: Australia cracks down on illegal foreign home buyers

“Investors are still looking for a rental return; however, it is likely they would also like to get capital growth,” she says. “There may be some people looking to buy holiday homes – we are seeing strong demand in places like Gold Coast from offshore buyers.”

Asian countries make up three of the top five foreign real estate investors in Australia, according to data released earlier this year by the Foreign Investment Review Board (FIRB). While mainland Chinese buyers topped the list of foreign investors in the Australian real estate market in 2014 with USD46 billion worth of approved investments, recent years have seen increased interest from Malaysian, Singaporean and Hong Kong property hunters. Over the same period, those markets combined spent more than AUD7 billion (USD5.4 billion) on property.



“Australia trades heavily off a reputation as a highly transparent, well-regulated real estate market underpinned by a sophisticated legal system and a stable economic environment,” according to Les Koltai, head of real estate for global law firm DLA Piper. “It’s perceived as an easy place to do business. What has also assisted in recent years is the introduction of the Significant Investor Visa in 2012, which gives high-net-worth individuals the ability to apply for an Australian visa and ultimately permanent residency on the basis of a minimum investment in Australia of five million dollars.”

More: Hong Kong buyer just snapped up luxury home in Sydney…via FaceTime

After a decades-long mining boom, the industry has slowed and Australia needs to stimulate its economy from alternative sources. Prime Minister Malcolm Turnbull addressed the issue during his Federal election campaign, by pushing for the embrace of newer industries such as technology and innovation. One of the quicker fixes is allowing foreign investment into previously government-owned assets, such as energy. Hong Kong-based China Light and Power own one of the largest energy retailers in the country, EnergyAustralia, for instance.

[pullquote]Australia is still the number two destination for Chinese investment in the world[/pullquote]

Real estate is yet another area primed for foreign investment. “The [Australian] government’s policy is to channel foreign investment into new dwellings as this creates additional jobs in the construction industry and helps support Australia’s economic growth,” says an FIRB spokesperson. “It can also increase government revenues, in the form of stamp duties and other taxes. Foreign investment applications are therefore generally considered in light of the overarching principle that the proposed investment should increase Australia’s housing stock – by creating at least one new additional dwelling.”

In August, the Victorian Government unveiled plans for a new residential suburb, Arden, on the northern edge of Melbourne’s inner city, to be developed over the next three decades on former Crown land. The low-rise, high-tech, sustainable suburb will have its own Metro station (a transport hub for the nearby CBD) and is expected to house 15,000 residents and create up to 34,000 jobs.

More: Are Asian home buyers facing racist backlash in Australia?

Universities remain a huge drawcard for buyers looking to provide accommodation for their children and invest in a low-risk property portfolio. In Melbourne, the inner-city suburb of Carlton is near the University of Melbourne and RMIT; a third of the suburb's residents are international students, predominantly Chinese, Malaysian and Singaporean.

Politics, however, is threatening the market. Upheavals in government, including the serial ousting of prime ministers, saw a shock result in the federal elections this year, installing a motley crew of senators with different points of view on foreign policy. Some of these senators have strongly criticised the country’s reliance on foreign, particularly Asian, investment.

[caption id="attachment_61595" align="aligncenter" width="740"]

Melbourne consistently ranks among the world's most livable cities. Gordon Bell/Shutterstock
Melbourne CBD[/caption]

 

"You go and ask a lot of people in Sydney, at Hurstville or some of the other suburbs (which have large populations from China and other Asian countries)," one senator, Pauline Henson, told the media in July. "They feel they have been swamped by Asians and, regardless of that now, a lot of Australians feel that Asians are buying up prime agricultural land, housing."

But with Asian (particularly Chinese) private individuals seemingly minded to invest, a slowdown seems – on the face of it at least – to be some time off. “We see Chinese buying growing in the next few years to new highs,” says Pittar of Juwai.com. “They are still eager to diversify their investments and to open up opportunities for their children overseas. And Australia is still a well-regarded destination for investment, education and immigration.”

Where to buy

 

SYDNEY


PROS: World-famous urban beach lifestyle; diverse ethnicity; financial stability

CONS: Stamp duty on foreign buyers; high beachfront property prices; decreasing auction rates

 

MELBOURNE


PROS: Dubbed world’s most liveable city six years in a row; fastgrowing prime property values

CONS: Lack of medium-density dwellings in the suburbs; rising living costs; expensive public transport fares

 

Three things to consider before buying property in Australia

 

  • Know the rules: The Foreign Investment Review Board is a handy place to get the latest information on notification requirements and guidance. Go here.

  • Apply for approval before purchase: In the case of established residential dwellings, as a foreign investor you’ll need to apply for an established dwelling exemption certificate via the Australian Tax Office.

  • Be wary of unexpected fees and taxes: “Keep in mind there are additional taxes for offshore buyers, as well as potential difficulties in accessing finance,” says Nerida Conisbee, REA Group chief economist. The most recent is a 10 per cent capital-gains tax on the sale price of the home, payable to the ATO by foreign investors.


  •  
 

How education is driving Australia’s property market


Education is the leading service export in Australia, and its fourth biggest export after iron ore, coal and natural gas. Over a quarter, or 26.6 percent, of foreign students in Australia are from China. Just 11 percent are from India, a historically significant market for foreign students in Australia.

According to Charles Pittar, CEO of property portal Juwai.com, “Chinese consumers increasingly say education is their primary purpose for property investment in Australia – 59.5 percent of all enquiries in 2015, up from 35.3 percent of all enquiries in 2014.”

International student education supports more than 130,000 jobs in Australia and brought in over 19 billion dollars in the year ending March 2016. And the benefits go both ways - only the United States and United Kingdom have more institutions in the top 100 of the QS World University Rankings than Australia. Some of the best include Australian National University in Canberra (ranked at 26), the University of Melbourne (31), University of Sydney (38), University of Queensland (48), and University of New South Wales (49).

Read next: Meet the Sydney-based real estate boss who does his own PR

 

Chinese billionaire snaps up Aussie trophy home for USD50 million

A house that has riven a family apart has been sold

The exclusive suburb of Point Piper in Sydney, New South Wales, Australia. byvalet/Shutterstock

The exclusive suburb of Point Piper in Sydney, New South Wales, Australia. byvalet/Shutterstock

It is arguably Sydney's most famous trophy house, hosting extravagant soirees and providing lodging for celebrity guests across the decades.

Altona, a mansion in the city's swanky Point Piper suburb, has come under Chinese ownership in recent years, a trend that is now set to continue with the recent sale of the mansion to a high-net-worth Chinese family based in Hunter Hills.

Jiaer Huang, chairman of Chinese paper manufacturing company Shantou Dongfeng Printing, and his family have been identified as the new owners of the Victorian Italianate-style mansion, Domain reported. The Huangs have acquired the house for AUD60 million (USD44.8 million).

Son of Huang Bingwen, one of Australia’s 20 richest people, Jiaer is a prominent Liberal Party supporter.


The Huang family bought the property from Wang Zhijun, who heads the luxury real estate development firm Qingdao Anteisin Group. Wang had purchased the property in 2013 from publisher Deke Miskin and his wife Eve for AUD53 million (USD39.6 million), a record in Sydney at the time.

Altona has been at the centre of a family dispute that involved Wang, who did not have permanent residency in Australia, gaining ownership of the property via a family trust fronted by Ding Xiuzhen, matriarch of a Melbourne-based Chinese family.

“It’s brought nothing but stress and greed to my family,” said her daughter Holly Chang in an interview with Domain. “We all thought it was going to be this lovely house, but it has left me estranged from my son, my brother, my mother, father and my sister.”
 

A lesson in how not to solve Sydney's housing affordability crisis

It's like 'trying to put a bushfire out with a hose' Sydney Opera House during the Vivid Sydney Annual Event in May. Leah-Anne Thompson / Shutterstock.com

Sydney Opera House during the Vivid Sydney Annual Event in May. Leah-Anne Thompson / Shutterstock.com



Sydney welcomed 31,000 new homes in the 12 months to October, the New South Wales (NSW) Department of Planning announced Thursday. This is apparently the most number of new homes to arrive within a year in over four decades.

The emergence of the new dwellings puts the NSW government closer to its goal of addressing the housing backlog across the state, according to Planning Minister Rob Stokes.

"By building a simpler, more efficient planning system, we're working to improve housing supply and choice to help people get into the market," said Stokes.

More homes have not translated into lower Sydney prices, however.

More: Which Australian markets are the biggest gainers of 2016 so far?

Housing affordability is one of the hottest-button issues gripping the country's largest city. According to Domain, the median house value in Sydney currently hovers at AUD996,000 (USD736,900).

Academics and government officials are at loggerheads on the best way forward to navigating the crisis. Augmenting the supply alone won’t douse overheating home values in the city and would be akin to "trying to put a bushfire out with a hose," Peter Phibbs, head of urban and regional planning at the University of Sydney, told the Sydney Morning Herald. "We're at 40-year highs [in building completions] and it hasn't generated any significant benefit."

Although Stokes "had done everything right," Phibbs said the Australian government should take a more federal approach to addressing the affordability crisis via taxation measures.

In a speech to the Committee for Economic Development last month, Stokes railed against the practice of negative gearing and its role in the crisis. "Why should you get a tax deduction on the ownership of a multimillion-dollar holiday home that does nothing to improve supply where it's needed?" he said.

The NSW government doubled stamp taxes in June and will be introducing a 0.75 percent land-tax surcharge next year. The levies stand to net the state government more than AUD1 billion (USD739 million) in revenues within four years.

Read next: Meet the Sydney-based real estate boss who does his own PR

 

Foreign share in Australian homes not as big as it seems

The value of not taking things out of context

[caption id="attachment_61813" align="aligncenter" width="1000"] Lunar lanterns celebrating the Chinese New Year of the Rooster at Circular Quay, Sydney, Australia, January 2017. wolffpower/Shutterstock[/caption]

It is a factoid that would strike fear into a natural-born citizen.

Around 11 percent or one in every 10 of homes in New South Wales went to a foreign buyer from July to September, according to the NSW Office of State Revenue.

A freedom-of-information investigation by the Australian Financial Review, however, found less daunting figures. The statistic apparently includes residential property purchases by dual citizens as well as joint transactions by Australian and foreign citizens.

Without this group, the share of foreign buyers in NSW residential property would drop down to just 8 percent.

AFR’s findings come as Australians on both sides of the political fence mull the culpability of international investors in local housing affordability.

More: Are Asian home buyers facing racist backlash in Australia?

A third or the majority of foreign buyers consist of Chinese, followed by Indians with 10 percent share, the NSW revenue office's data showed.

Many foreign buyers appear to have successfully obtained the status of permanent resident under Australia's migration program. This explains why only 1.5 percent of foreigners paid the 4 percent surcharge on property purchases introduced in June, AFR reported. Individuals who have legally resided in Australia for more than 200 days in the previous year are exempted from the surcharges.

Foreign home buyers usually prefer properties that the average first-time home buyer would otherwise shun or be unable to afford. "It’s not like they’re spread out all across the city,” Peter Phibbs, University of Sydney chair of urban and regional planning and policy, told News.com.au.

“You can’t imagine your first homebuyer that’s trying to buy a crappy semi in the middle of the suburbs is going to have to fight a fight with an investor over that sort of property.”

Read next: Has Australia had enough of Asian buyers?

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