Will axing of the ‘golden visa’ hurt the property market?

The demise of the so-called golden visa, which was axed this week by the Australian Government, will see fewer super-wealthy buyers, mostly from China, vying for luxury property in Australia.

The significant investor visas (SIV) had been granted to applicants who could invest more than $5 million in Australia.

The program was implemented in 2012, with 85 per cent of successful applicants coming from China according to government data.

Its intention was to generate foreign investment and stoke innovation but critics had long pointed out that the scheme had been hijacked by corrupt officials using it to launder and hide illicit funds.

“It has been obvious for years that this visa is not delivering what our country and economy needs,” Clare O’Neil, Minister for Home Affairs, said.

Last year, 269 SIVs were awarded, of which it is estimated mainland Chinese and Hong Kong buyers accounted for about two-thirds of those.

The loss of this high-end pool of property buyers coincides with the latest CoreLogic report that shows Australia’s wealthiest coastal property markets have declined or underperformed against the wider market over the past year or so.

Big spenders will find a way

Property markets below a median $5 million were unlikely to feel any impact from the scrapping of the visa for the ultra-wealthy.

Daniel Ho, Group Managing Director, Juwai IQI, said high end, golden visa buyers from mainland China and Hong Kong probably accounted for less than 5 per cent of all Chinese resident and non-resident buyers.

“This visa channels high-end buyers into Australia’s most exclusive property markets, where homes cost $5 million, $10 million or even $40 million.

“It doesn't have much impact on the market overall because these premium neighbourhoods are the enclaves of the rich and famous.

“These buyers seek out new luxury apartments and mansions in Toorak, Hawthorn, Vaucluse, Mosman, Bellevue Hill and the more expensive areas in Sydney’s North Shore.”

Despite being hit with a barrage of imposing fees, taxes and surcharges, foreign buyers have somehow not been scared away from Australian real estate.

In total, mainland and Hong Kong Chinese buyers were approved to acquire $4 billion of Australian residential real estate in 2022–23, a figure that includes buyers of all price ranges.

Australia issued 5,000 Business Innovation and Investment visas in 2023. Chinese and Hong Kong applicants accounted for 64 per cent of the visas issued in the wider category of Business Innovation and Investment Visa class, within which the SIV sits.

Mainland Chinese participants (excluding Hong Kong) accounted for almost exactly half of all the Business Innovation and Investment visas issued in 2023.

“That’s down from a peak of 75 per cent in 2015, but up dramatically from the time when China’s borders were closed due to Covid,” Mr Ho said.

“In 2022, the Chinese share had dropped to 39 per cent. China also outnumbers other nationalities simply because of its large population of high-net-worth individuals, which is now world-leading; it’s just a question of numbers.”

Wealthy regional coastal property markets in retreat

As the super prime property market awaits the impact of the golden visa’s extinction, the top end of the country’s regional coastal property markets are struggling.

A CoreLogic study, which analysed 368 coastal markets at least 50km from the nearest capital city CBD, found the beachside suburbs of outer metro Perth recorded the largest gains in value in 2023.

Speaking to API Magazine, Mr Ho said extinguishing the golden visa could have an effect on this market.

“In the regional market, some international buyers have been significant purchasers of tracts of land and trophy homes.

“The visa changes could crimp this trend, at least in the short term.”

Western Australia dominated the list of top coastal suburbs with the highest annual capital gains, claiming more than half of the top 20 spots. Mandurah had six suburbs, Perth's South West and Bunbury each had three.

Among the suburbs recording the ten biggest drops in value relative to their peak, seven of the top ten had a median price above $1 million.

This was in contrast to the corresponding top ten largest price gains, all of which were below the $1 million dollar mark (nine of which were suburbs of Wide Bay, Queensland).

CoreLogic Research Director Tim Lawless said the prestigious Victorian coastal villages of Portsea, Flinders and Sorrento on Melbourne’s Mornington Peninsula dominated the top three most expensive coastal suburbs.

Other regions well represented in the top 20 list include Queensland’s Sunshine Coast with four suburbs, Richmond Tweed with three suburbs and Geelong and Illawarra, each with three suburbs.

Portsea has a median dwelling value of $3.03 million, ahead of Flinders at $2.33 million and Sorrento at $2.05 million.

Between March 2020 and their cyclical peak, Portsea values shot up 65.3 per cent, Sorrento increased 69.8 per cent and Flinders lifted 63.7 per cent.

“Melbournians fled to the Mornington Peninsula during the pandemic, if they could afford to, and the increase in activity and a lack of stock pushed up values significantly,” Mr Lawless said.

“Now that internal migration from cities to regions is normalising there’s less competition among buyers who also have the benefit of more listings and therefore the power to negotiate on asking prices.”

Of the 368 regional coastal suburbs analysed, 35 per cent had values at a peak in December 2023 while an additional 8.7 per cent of markets recorded a modest fall in value of less than 1 per cent.