Australia is not the only country in Asia facing a housing crisis. One of the reasons many analysts are sceptical about China’s latest stimulus package – its most aggressive since the Covid-19 pandemic erupted – is the scale and severity of the downturn in the residential market. At the end of last year, Nomura estimated the number of pre-sold but unfinished properties had reached a staggering 20 million units.
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House prices in Hong Kong are down almost 30 per cent from their peak in 2021. However, the city was still the least-affordable housing market last year among eight of the world’s leading property markets for the 14th year running, according to Demographia. Some Asian central banks are wary of cutting interest rates because of pressures from overheated property markets that are exacerbating the deterioration in affordability.
However, Australia’s housing crisis is the most severe among Asia’s advanced economies. That Australia is part of the Anglosphere and is one of the most transparent commercial property markets in Asia underscores the importance of the crisis as a theme in global real estate markets, particularly at a time when investors and developers are focused on the living sector.
Even in Asia, where offices constitute the largest share of investment activity, the living sector – which includes rental housing, purpose-built student accommodation and senior housing – is attracting increasing interest among institutional and private investors. Multifamily, or build-to-rent, properties have emerged as the most preferred commercial property sector in the region, according to survey data from CBRE.
The factors that contribute to Australia’s housing crisis, in particular the woeful failure of federal and state governments to increase supply and the recent surge in net overseas migration that has exacerbated the deterioration in rental affordability, have created investment opportunities for big investors, particularly Asian buyers.
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Last year, Japan was the largest source of foreign investment in Australia’s commercial property sector. Not only did Japanese investors deploy more capital in Australia in 2023 than in the previous 20 years combined, half of their outlays were in the emerging build-to-rent sector, according to MSCI data.