The multi-year housing boom in Australia has been met with restrictions on lending and foreign investor duty surcharge over the past year but this has not meant that the Australian property market is now losing steam as first-home buyers or owner occupiers in Australia have stepped in to pick up the slack. So why are people still investing in Australia despite measures to curb foreign investment and which locations are foreign investors looking at now?
Investing in Australia: Growth drivers
Despite stricter local lending to foreign buyers as well as foreign buyer taxes imposed, interest rate in Australia is expected to be maintained at current low levels for at least the rest of the year as the Reserve Bank of Australia continues with its patient approach to policy normalisation. This could help support property purchase and ownership. In addition, the strong population growth over the next five years – forecast to double the average of the world’s top 30 economies – will fuel greater demand for homes.
Sydney is also undergoing an infrastructure and construction boom, with developments including the multi-billion-dollar new light rail and metro railway projects, the second Sydney Airport at Badgerys Creek, Northern Beaches hospitals, and Pacific Highway. These projects underscore the strong fiscal position of the New South Wales government, which has committed AUD72.7 billion to infrastructure investments over the next four years.
With measures in place to deter speculators, home prices have started to ease in recent months. According to data from CoreLogic in March 2018, home values in Sydney fell by 2.4% in the last quarter, but the Eastern suburbs have bucked the trend.
Eastern suburbs defy general Sydney market weakness
As the saying goes, in real estate it is all about location. Colliers believes prime real estate in Eastern Sydney will remain attractive to home buyers and investors. The fact that home values have remained resilient in parts of the Eastern suburbs did not come as a surprise – residential development land is scarce here and choice units are hard to come by; when they do hit the market, units are snapped up quickly.
Picking a property in a sought-after location with price upside – such as Randwick – is an important consideration, partly due to foreign ownership rules in Australia which require foreign investors to sell-on their properties to Australian citizens or permanent residents.
Prices in prime areas in the East of Sydney have been more stable as a higher proportion of the owners are occupiers themselves, rather than investors or speculators.
One of the key reasons Randwick has been able to perform well is that it thrives on stable end-user demand.
Known as the education and medical precinct of Sydney, demand is expected to grow for Randwick, with improved connectivity brought about by the upcoming CBD and South-East light rail, as well as improved bus network.
Rosy outlook for Randwick
The limited new housing supply and rising appeal of the location have lifted median prices and rents in Randwick. The upcoming infrastructure and transport improvements could bring more job opportunities and population growth to Randwick, further boosting demand for homes in the coming years.
The upcoming Sydney Light Rail could begin operation as early as 2019. Along with the newly designed bus network, it will increase city-bound morning peak capacity by more than 30% from Randwick and will likely cut commuting time, providing a convenient and reliable transport option for residents.
With the convenience of four light rail stops servicing key local destinations in Randwick - Centennial Park, Randwick TAFE, the Royal Randwick Racecourse, the University of NSW, the hospital and medical precinct, and the Randwick shopping centre – the suburb’s connectivity and quality of living will be unparalleled, making it the next property investment destination to lookout for in the Sydney market.
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