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Sean Tan

The Singapore love affair with a home Down Under

BY SEAN TAN

Sun, beaches, surfing, adventure – these are the first images that come to mind when you think of Australia; now imagine living there!

According to Real Capital Analytics, Singaporeans are one of Australia's top investors. This is hardly surprising, as respondents in the iProperty Asia Property Market Sentiment Report have repeatedly chosen Australia as one of their top locations for overseas property investment.

A breakdown of visitor behaviour on iProperty.com.sg also shows Australian properties having the most page views among international property options.

A recent Monetary Authority of Singapore report further validates this, noting that, of overseas property transactions by Singaporeans, Australian properties accounted for 91 percent by value and 76 percent by number in 1H 2014.

The report also stated that overall overseas property transactions rose from $1.9 billion in 2012 to $3.0 billion in 2013, and $1.1 billion in 1H 2014.

Australia's attraction

In Knight Frank's 2014 Global House Price Index report, Australia is recognised as having one of the highest growth rates of annual house prices globally. A stable political environment, resilient domestic economy, and low interest rates, coupled with capital gains and good health and education systems are just some factors why investors are attracted to the Land Down Under.

The country also enjoys high population growth, estimated at 1.7 percent in the year ending March 2014. Growth is reported across all Australian states, bringing increased demand for housing.

For property investment, consider Sydney and Melbourne, recognised in the most recent Economist Intelligence Unit's Global Liveability Index, as among the world's most liveable, with Melbourne ranked first and Sydney in seventh place.

In Knight Frank's Global Cities Survey, Melbourne comes out tops once again for quality of life, while Sydney is third. Little wonder Australia is a top choice for Singaporeans when it comes to planning for a retirement home.

And if liveability doesn't excite you, capital gains in Sydney and Melbourne may convince you. Apartment values in the two cities have seen the fastest growth in Australia.

Apartments in Sydney have recorded growth of 13.2 percent and Melbourne 8.27 percent over the past 2014, according to property consultant CoreLogic RPData. Knight Franks reports that the median capital values of apartments in the metropolitan regions of Sydney and Melbourne are AU$568,500 and AU$462,500.

For Singaporeans, a strong Sing dollar exchange rate provides an added advantage for investments.

Rental yields in Sydney and Melbourne are perhaps less attractive, due to high prices, but are between 4.8 and five percent. Rental demand is also more assured than in other states, as the cities attract a steady flow of foreign students and expatriates.

Melbourne and Sydney are ranked among the top five best cities for students, according to higher education data experts QS, considering the affordability, desirability, academic standards, and job prospects of each location.

The country in general is also popular among expatriates looking to relocate. In the Expat Insider Survey 2014, Australia ranks among the top ten countries for its leisure options and health, safety, and well-being.

Affluent Asian investors are already placing their bets on the country. Last year HSBC conducted a survey of 1,015 affluent investors across Asia, and Australia emerged as one of the top investment property destinations. More than a third of High Net Worth Individuals (HNWI) from Asia own property in the country.

Interestingly, the affluent Asian crowds are looking outside of the buzzing cities of Sydney and Melbourne for investments. HSBC research cites smaller property markets such as Queensland and the Australian Capital Territory (ACT) seeing more interest from HNWIs.

This is assumed to be because of a better entry point into the Australian property market, since capital values have not spiked as much as in New South Wales and Victoria. Rental yields are also higher, with Queensland and ACT enjoying rental yields of 6.45 percent and 5.19 percent respectively.

Watch the regulations and policies

The domestic market is beginning to be sensitive about foreign buyers driving up home prices, and foreign purchases are now being closely scrutinised by the Foreign Investment Review Board (FIRB). Regulations in Australia allow for non-citizens to purchase only newly-built homes, rather than established properties.

Buyers who flout regulations will be made to forfeit their capital gains and will face civil penalties. An application fee of up to S$1,670 may also be imposed on foreign investors to help fund FIRB investigation and enforcement operations.

Even with recent reports cautioning buyers, the Australia market continues to draw investors. The recent launch of Aurora Melbourne Central by Malaysia developer UEM Sunrise saw 95 percent of all 941 units taken up within a month of its preview. Singaporeans took up 15 percent of the units, followed by buyers from China and Hong Kong (30 percent), Australians (25 percent), and Malaysians (22 percent).

Australia, for its beautiful landscapes, high quality of life and proximity to our sunny island remains a favourite among Singaporeans. We enjoy it so much that we have even imported the Melbourne coffee culture. Whether we choose capital gains, migration, or a holiday home, the love affair Down Under beckons.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.

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Sean Tan

Sean Tan

Sean Tan is Singapore General Manager and Chief Business Development Officer at iProperty Group. He has extensive overseas exposure and has worked in several multinational and cross-culture corporate environments. Sean holds a Master of Project Management from the University of Adelaide, Australia.

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