Australia’s real estate sector is set for a much-needed boost as hundreds of Significant Investor Visa candidates get their most returned and permanent residence status.
Come July 2019, around 880 candidates who applied under the SIV program between 2013 and 2015 are likely to become Australian permanent residents and receive their investments back.
$4.5 Billion Free for Luxury Real Estate Investments
These investors will be free to invest around AUD $4.5 billion as they see fit without any sectoral caps, lock-in periods, or other restrictions.
Not surprisingly, much of this money is expected to find its way into Australia’s real estate market.
A common criticism of investment immigration programs across the world, including Australia’s SIV, is the correlation between influx of wealthy immigrants and rapid increase in real estate prices.
Programs like Greece’s golden visa offer permanent residence against real estate investment, which has led to mass evictions across Athens as investors buy up properties and convert them into Airbnb rentals.
Applicants to Australia’s SIV were never allowed to use direct investments into real estate – residential or commercial – as a part of the AUD $5 million investment requirement.
Before 2015, investors were permitted to invest in managed funds investing in various asset classes including real estate.
After the changes introduced in 2015, the rules were further tightened, with investments in managed funds investing in residential real estate capped at 10 per cent of the ‘balancing’ investment component of AUD $3 million.
Yet despite all the efforts to prevent investment immigrants from pumping money directly into the real estate market, it is likely to come to nothing.
Prolonged Real Estate Crash
Australia’s real estate sector has been going through a prolonged crash with prices of homes in the country’s most expensive real estate market – Canberra – falling by 12.3 per cent over the past year.
Having fulfilled the four-year lock-in requirement and acquired permanent residence in the country, it is natural for investors to wish to buy their own homes in Australia.
With each SIV investor boasting an average net worth of $50 million, luxury home markets in cities like Melbourne, Sydney, and Brisbane may see higher prices in 2019.
China is the biggest source of demand for the SIV with 90 per cent of all visas issued so far going to investors from China.
Further, Chinese investors account for one out of every four foreign real estate investments in Australia, a number likely to grow further once SIV money starts flowing into the real estate market.
Whether higher demand for luxury real estate will help Australia recover from its real estate slump or not remains the five-million dollar question.