Why the Australian residential market is attractive to Singaporean investors

Houses and apartments recorded an average 6.8% and 21.9% year-on-year capital growth, respectively. 

Based on Knight Frank latest research, new cooling measures in the Singapore property market, coupled with buoyant property values and rents in Australia market, could spur more purchases from Singaporean investors. Singaporean investors in Australian residential property favoured capital appreciation over rental income. A majority are generational buyers from the city-state and hold onto their properties much longer than other international investors.

In Australia, non-resident international buyers are generally limited to purchasing new or off-the-plan property. Foreigners typically do not buy from the resale market. This is due to Australian government’s policy to channel foreign investment into new dwellings, as opposed to established dwellings, to create additional jobs in the construction industry and help support economic growth.

Michelle Ciesielski, Head of Residential Research, Knight Frank Australia noted, “This regulation was intended to add to Australia’s pool of rental properties, which is currently exceptionally low given rental vacancy is trending below market equilibrium of 3%. Traditionally, about half of international buyers in Australia buy new apartments, while one-third buy a standalone (or landed) property and the remainder invest in a single land lot which will accommodate a standalone house once constructed.”

Whilst Australia’s property market continues to be transparent, adequate preparation is needed before making a property purchase. For example, international buyers would need to apply to the Foreign Investment Review Board (FIRB) for approval before purchase. Each application is also property-specific and a fee is payable before it is processed and approved. The FIRB fee on application does not guarantee that the purchase will go through, hence it is important to seek guidance from property advisors along the buying process.

Ciesielski shared, “Currently, there is a diminishing pipeline of new apartments being built across Australian capital cities as competition from local investors has ramped up as they strive for solid rental incomes in the current low interest rate environment. Given that Australia has reopened its borders to tourists, we expect an increasing number of Singaporean and other international buyers to return from mid to late 2022.”

Among the Australian cities, Melbourne and Sydney stood out the most, given their attractiveness as global and cosmopolitan cities. Melbourne is home to some of the world’s biggest cultural and sporting events while Sydney is a strong financial hub. Singaporean professionals tend to be drawn to the city of Sydney, whilst Singaporean students and their families are attracted to Melbourne.

According to Knight Frank’s City Wealth Index 2022, out of 100 cities, Sydney and Melbourne are amongst some of the most attractive cities to the ultra-wealthy. Sydney is ranked 7th for wealth, 21st for investment and 30th for lifestyle. Whilst Melbourne placed 16th for wealth, 31st for investment and 50th for lifestyle.

Nicholas Keong, Head of Private Office at Knight Frank Singapore said, “Australia has always appealed to Singaporean buyers especially from families with children heading there for education, and those looking for a second/holiday home. On average, these houses and apartments across major Australian cities recorded an average 6.8% and 21.9% capital growth year-on-year respectively. (See Exhibit 1.) When buying apartments across Australia, close to three-quarters of international buyers are seeking a price point below A$1million, which is why more international investment sales tend to occur in Melbourne, the Gold Coast and Brisbane.”