THE Albanese government’s ambitious plan to build 1.2 million homes in five years has suffered a significant setback, with foreign investment in Australian property falling by more than $1 billion in the past financial year.
The latest Foreign Investment Review Board (FIRB) data reveals that offshore buyers spent $6.6 billion on Australian homes in 2023-24, a sharp drop from $7.9 billion the previous year. This $1.3 billion decline includes an $800 million reduction in purchases by Chinese investors, traditionally a major driver of new housing developments.
Restrictions on foreign buyers purchasing existing homes mean their investment is vital for funding new construction.
However, with international capital dwindling, the Housing Industry Association (HIA) warns the Federal Government is unlikely to meet its 1.2 million home target by mid-2029.
HIA chief economist Tim Reardon highlighted that Australia built close to 120,000 apartments annually in 2015 before state and federal taxes discouraged foreign investment.
Mr Reardon criticised this “perverse” policy approach, which simultaneously calls for increased housing supply while disincentivising a key funding source.
“We need 240,000 homes built annually to meet the target. Every dollar of foreign investment lost makes this increasingly unlikely,” Mr Reardon said.
The reduced international capital has broader implications, including fewer rental properties and slower commercial property development. FIRB figures show commercial real estate transactions have halved in the past year, plunging from $50.2 billion to $23.3 billion.
PropTrack data showed back in May, that while international searches for Queensland properties rose 0.8% in 2023-24, this growth is modest compared to pre-Covid levels.
Economists warn that addressing Australia’s housing crisis will now depend heavily on domestic buyers and tackling rising costs.
Oxford Economics’ Timothy Hibbert cautioned that relying on foreign investment was no longer a viable solution.
As Australia grapples with a housing and rental affordability crisis, industry leaders urge the government to strike a balance between policies that attract foreign capital and measures that boost local housing supply.
Failure to do so could leave the nation falling short of its critical housing goals.
