Strained political relations with China, Foreign Investment Review Board rule changes and extra taxes from state governments could also be affecting numbers of overseas buyers.
CommSec senior economist Ryan Felsman said the initial uptick of buyer interest at the start of 2022 reflected international students re-entering Australia, but interest in blue-chip, affluent suburbs was driven by returning expats and higher-skilled migrants.
“They’re looking in those more affluent suburbs [because of] proximity to schools and a variety of amenities such as beaches and parks and, in some instances, proximity to train lines and transportation links,” Mr Felsman said.
“They are the type of suburbs which will hold their value if we see a property downturn if interest rates lift.”
The drop-off in foreign buyer searches coincided with two years of closed borders during the pandemic, Mr Felsman said, adding that air travel to Australia was still prohibitive.
Meanwhile, buyer searches dropping off in regions such as the United States and Hong Kong reflected changing behaviors back home, too.
“In America, we have seen more people move from New York to sunbelt cities like Atlanta, so we may have seen people in certain parts of the world decide to relocate internally.”
He said there was more of an incentive to relocate within America rather than abroad because of the strong jobs market at home and local wage growth of between 4 and 5 per cent.
Mosman selling agent David Murphy, of David Murphy Residential, said many expats and foreign buyers were interested in Australia’s overall favorable economic conditions.
“It’s been one of the best-performing property markets in the world. It’s gained the attention of offshore buyers and investors,” Mr Murphy said.
“The trend for the Australian dollar for the past six to 12 months has been losing value. If you’re earning British sterling, it’s becoming better value to buy in Australia.”
A number of eastern suburbs also made the top 10 most sought-after locations by foreign buyers, including Bellevue Hill, Paddington and Darlinghurst.
The Agency’s Ben Collier said buyers were choosing these areas for proximity to sought-after schools, but also to the city and surf.
“I’m still selling properties to people sight unseen,” Mr Colliers said, adding that first COVID then political uncertainty was encouraging expats and foreign buyers to move to Australia.
He said the upcoming federal election had spooked sellers more than buyers at this stage, with very few premium listings on the market at the moment.
Mr Felsman agreed, saying the biggest factor influencing foreign buyer interest would not be the federal election, but future interest rate rises in comparison with other countries such as the United States.
Australia could also see foreign buyer interest from regions of uncertainty, including Asia and Europe, Mr Felsman said.
“The Ukraine war will unnerve a few people; those people in eastern Europe will prefer to be in a safer part of the world. That could be a factor, and certainly in Asia as well there are tensions with China and Taiwan,” he said.
“We don’t see the return of expats and foreigners massively supportive of house prices. We think interest rates lifting will have more of an impact than foreign buyers. Overall, we think home prices will be flat this year.”