FIRB residential approvals: Westpac's Matthew Hassan
GUEST OBSERVER
The Foreign Investment Review Board (FIRB) annual report includes updated figures on approvals of foreign purchases of Australian residential real estate.
The data is annual, dated and has been heavily criticised in the past as an inaccurate measure of the true level of foreign real estate purchases in Australia.
However, it is essentially the only information on the topic with any sort of consistent back history and is therefore a rare clue as to the size, growth and composition of demand from this segment.
For 2014-15, the aggregate figures show:
36.8k approvals for residential real estate purchases totalling $57.9bn, equivalent to 7.3% of total sales by number and 15.5% by value (note that the treatment of ‘developer off the plan’ approvals means this likely understates the number of properties purchased but overstates the value)
FIRB approvals are up 60-65% on 2013-14, very strong growth but slower than the 98% gain – i.e. doubling – in the previous year and the 150%+ surge in 2010-11.
The FIRB figures are lower but in the same ‘ballpark’ as the other main estimate of foreign buyer demand – the NAB property survey, respondents to which have put the proportion of foreign demand for residential real estate at around 5% for existing and 15% for newly built dwellings.
The state breakdown of FIRB approvals shows:
Vic continues to be the dominant location for properties being purchased by foreign buyers – approvals imply foreign buyers accounted for around 14% of total sales by number and over 30% by value, the latter up 80%yr.
Qld saw particularly strong growth in 2014-15, the value of FIRB approvals jumping 180%yr, but is still a small share overall – 17% compared to NSW and Vic which combined accounted for 77% of FIRB approvals (by value).
More recent market data shows a sharp slowdown in turnover since mid-2015. With the number of domestic owner-occupier finance approvals rising over this period, other segments are clearly driving the slowdown. While lower domestic investor activity may be the main factor, some slowing in foreign buyer activity may also be contributing.
Matthew Hassan is senior economist with Westpac.
