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Australia's Reopening Unlikely To Immediately Bring Foreign Buyers To Residential Property Market

'For residential property, it won't be an immediate shift,' says Savills Australia executive Industries such as tourism and hospitality will, however, be boosted immediately

Australia's Reopening Unlikely To Immediately Bring Foreign Buyers To Residential Property Market

A planned reopening of its borders is unlikely to have foreigners rushing back to Australian residential property, giving locals some space to cope with soaring home prices, analysts said.

Last week, Canberra announced that it was aiming to reopen its international borders by Christmas at the latest, raising hopes that foreigners would finally be able to visit Down Under. That this could potentially lead to a deluge of foreigners snapping up homes in Australia was unlikely, according to analysts.

"For residential property, it won't be an immediate shift. We should see migration return gradually, which will add fuel to the fire for the existing boom that housing is currently experiencing," said Chris Orr, director, residential at Savills Australia.

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Home prices in Australia have been surging, which prompted the International Monetary Fund to urge Canberra last week to cool the market, as a property price bubble could pose a risk to its economy, according to a report by The Sydney Morning Herald. So far this year, home prices have risen to a 32-year high of 18.4 per cent, while wages have risen by a mere 1.7 per cent.

As of June, Sydney was the world's top prime property market, with prices rising 10 per cent, according to Knight Frank. The city's rise to the top comes despite the Covid-19 pandemic, various property cooling measures Australia has imposed in recent years, and a deepening rift between Beijing and Canberra that is perceived to have turned Chinese buyers off Australian property.

In another study by Knight Frank last month, five Australian cities - Perth, Gold Coast, Sydney, Brisbane and Melbourne - placed in the top 30 of an index tracking 46 prime global cities, with property prices in these cities rising between 3.6 per cent and 8.1 per cent from a year ago.

For Yarra One, a residential project of EcoWorld International Australia in Melbourne, the reopening of borders "will most definitely support the property sector". The development has 247 units with 75 per cent already sold. A quarter of these units were sold to buyers from mainland China and Hong Kong.

"I believe there will be an increase in Chinese and Hong Kong interest in the [Australian] property market again, once the border reopens," a Yarra One spokesman said. "If international borders are to open in December, this will only add to the demand for properties, as it would be locals and foreigners back in the market."

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A sector that is likely to immediately feel the difference when borders reopen is Australia's hotels property segment. The return of international tourists is expected to provide a much-needed shot in the arm for the struggling segment.

"We will see more of an immediate effect on the industries that have been severely impacted by lockdowns, such as tourism and hospitality," said Savills Australia's Orr.

It is expected that the accommodation sector will recover quickly from pandemic-induced difficulties with Christmas 2021 and the year of 2022 tipped to be strong domestic travel windows, said Nick Lower, state director - hotels (New South Wales and Victoria) at Savills Australia. "Once international borders open, we expect to see key Australian tourism and accommodation indicators skyrocket," he added.

Much like other markets across the globe, Australia's foreign tourist arrivals slumped in 2020 as borders were shut down to stem the spread of Covid-19. Its international visitor numbers fell 80 per cent.

"With the goal of reopening by the end of the year, Australia looks to be set on a good path towards recovery," said Cinn Tan, chief of sales and marketing at Singapore-based hotels operator Pan Pacific Hotels Group. "We are optimistic that the hotel segment will see some rebound next year, depending on the extent to which the country will reopen."

The company opened its Parkroyal Monash Melbourne, which has 250 rooms and suites, in April and since then has had an average occupancy of about 15 per cent.

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