Australia – an attractive investment destination for Asian investors

There are many reasons why people invest in properties overseas. Assuming that we are talking about savvy investors instead of those who were misled with excessive promises and misrepresentations about properties overseas, we can largely divide investors into two camps: push and pull. The former refers to those who were ‘pushed’ overseas due to constraints or unfavourable situations in their local markets and the latter who were saw the attractive investment conditions of overseas properties.

And Australia attracts investors aplenty from both camps, from all across Asia.

Instead of investigating as to why investors from different countries are investing in Australia, we are going to look at the push-pull factors and how each of them has an impact on how investors are participating in this somewhat perennial but controversial market.

The Pull Factors

One of the most undeniable pull factors for Australia is the quality of life and its proximity to Asia, hence also explaining the strong presence of the Asian community. It is generally a very viable and attractive alternative for some who might have grown jaded with living in the common crowded Asian countries laden with traffic jams, pollution and the usual problems of developing countries. From laid-back Perth to fast-moving Sydney, Australia offers a lifestyle choice of varying pace that appeals to investors with different needs and wants.

For many, the strong regulatory system is another plus point. Australia ranks the lowest in corruption ranking among the G20 countries, even lower than Canada or Germany. Many investors look to Australia as not just a preferred country to invest but also as the utopia-like escape from the markets that they have lost faith in. A strong regulatory system also means that the investment conditions are relatively much easier to manage than in most countries. Australia remains one of the few markets where we constantly encounter investors having held properties for more than a decade. While the prices has predictably went up against their purchase prices since, the reluctance with which to let go of a property with stable and predictable rental yields serves as a good testament to what predictability can do for an investor’s confidence in the country.

Over the last couple of decades, Australia has also progressed from a country with significant, perceived or otherwise, racial discrimination to one which stresses on equality and acceptance. As a nation, I would say that the Australians have always had a very strong sense of social responsibility and integrity.

The principle of equality applies property investments by foreigners too. Most of the key property policies do not take into account citizenship, hence making it a conducive market for foreign investors. While there are certain constraints and fees, they are still acceptable widely by most investors as many a times, foreign investors do not contribute significantly to the economy from a consumption perspective. However, these constraints have often led to fallacies about the market.

The recent devaluation of the AUD, coupled with interest rates at its historical low have also attracted a growing population of overseas investors to Australian property. As the Australian economy transits itself from a decade of commodity boom to manufacturing, energy and services, we expect it to continue to prosper while awaiting the world economy to revive and along with it, commodity demands. In this aspect, Deloitte has done an excellent series on “Building The Lucky Country” which investors should examine.

Another key pull factor driving investors to Australia will be it being a safe haven. A quick examination of the economy will reveal its diversity and strength and all the 4 major banks are AA rated by by Moody’s, S&P and Fitch. It is pretty tough to find another economy with similar sturdiness in terms of economic foundation.

The Push Factors

It doesn’t take much to figure that the push factors are largely the opposite of the pull factors. While the pull factors can be generally universal regardless of where the investors are from, the push factors tend to differ across locations.

Investors in countries with challenging politics and governance tends to be attracted to Australia for obvious reasons, such that the nation is seen as an utopia in that aspect and is seen as the safe haven in closest proximity to Asia. Investors from more stable countries however, would prefer the lifestyle, cultural diversity, low currency and economic stability that Australia offers. Australia is often seen as a diversification strategy and a great alternative to park funds safely.

What & Where To Invest In Australia

To talk about why investors continue to pour monies into Australian property without discussing where and what they should be looking out for would be like telling just half the story. However, the reality is it would take a whole entire long article to discuss such a topic in detail so let me perhaps dish out some simple pointers for your consideration.
Buy what the locals would. Many Asian investors are flooded with products that are designed for their purchase, and not necessarily aligned to local market demands.
Buy at the right price. We often see investors buying simply because similar offerings are cheaper than in their home country. It doesn’t work that way. Always be clear that prices are marked to local market and not your market.
Buy where there is potential growth, not where growth has already happened. Be clear also about your objectives, be it buying a home to live in or for investment. Often, investors confuse themselves between the two and end up with a great property in a great location which does nothing for them financially.
Buy because the property is good and not purely for the advantageous currency conversion. We have seen many buying properties when the currency is in their favour. While that may be a bonus, it cannot be the sole reason to buy a particular property.
Buy investments, not incentives. Incentives in our opinion, is how developers and marketers distract you from your investment fundamentals. A rental guarantee may not show the true nature of the rental market while additional furnishings and features may translate to higher maintenance costs.


DISCLAIMER: The opinion stated in the article is solely of Dan Toh, CEO of RunningStream International and is not in any form an endorsement or recommendation by Readers are encourage to seek independent advice prior to making any investments.