China now biggest foreign investor in australia

Sydney Harbour Photo: Wikimedia Commons

China has overtaken the USA to become the biggest foreign investor in Australian property.

The latest figures from the Foreign Investment Review Board reveal that in the financial year of 2013-14, a total of $167.4 billion of proposed investments were approved from overseas investors.

Residential and commercial real estate totalled $74.6 billion, up 44 per cent from the previous year. China spent a total of $12.4 billion on real estate, up from $5.9 billion in 2012-13 and more than double the $6.1 billion spent on property by the United States, making Chinese buyers the biggest international force in the market. Singapore and Canada also invested $4.3 billion and $2.9 billion respectively.

Victoria was the most popular state, with $10.41 billion of investment approved, followed by New South Wales ($10.39 billion) and Queensland ($2.8 billion).

The surge in investment from overseas has sparked concern in the past year, as professionals speculate that the foreign demand has helped to push up property values and price out local house-hunters.

In response, the government has now announced a crackdown upon foreign investment, with penalties for overseas buyers who purchased property illegally.

At the same time, the Reserve Bank of Australia has also sought to cool down Sydney's property market, as demand and low supply has helped to fuel a 40.2 per cent rise in property prices since May 2012.

Some, though, have argued that the RBA's decision to slash interest rates to a low of 2 per cent could only encourage interest.

"A growing level of affordability may encourage more people to buy in," Angie Zigomanis of BIS Shrapnel told Domain Group.

Raine & Horne Maroubra principal Paul Spanoudakis added: "We still have some buyers sitting on the fence and it's likely [with this rate cut] they will jump in now."

Domain Group's senior economist, Dr. Andrew Wilson, has also predicted that Sydney could have a median house price of $1 million by the end of 2015, with a potential $2 million median by 2030.