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Amineh Nakhbaf came to Australia from Iran on a business visa four years ago hoping the Australian property market would be easier to break into than Tehran's.
"Tehran is one of the [most] expensive [cities] in the world," she says.
"But the same unit or property that you have in the same standard [in Tehran], is very very far from that standard [here]. So still if you sell your property there, you still have to generate your business to get more [a bigger] loan to buy close to that standard that you are looking for."
Ms Nakhbaf's story is typical of skilled migrants who come to Australia on temporary visas with a view to buying housing and gaining permanent residency.
She runs a kitchen renovation business out of western Sydney and says, even with $200,000 in savings, she's finding it hard to locate a suitable property.
She also owns a property she can sell in Tehran, but says even that won't be enough to cover the cost of running her business and the high cost of housing in Sydney.
Houses in the area she's looking at cost about $2 million.
"I don't want to pay [take out] that much [of a] mortgage because I want to expand my business," she says.
"Interest rate is another concern for me … because I don't have a permanent residency here, I have to pay double stamp duty," she says.
Non-residents pay higher taxes on property purchases. Fees to the Foreign Investment Review Board start at $13,200 for residential property purchases of $1 million or less, rising to a maximum of $1,045,000 for purchases of more than $40 million.
Temporary residents also must pay higher stamp duty to state governments.
Ms Nakhbaf says that's a cost she's willing to bear to become a home owner. She hopes to own her own home within the next 12 months.
"I [will] try my best [to get a home] as soon as possible because I'm paying rent, and this is [too] much pressure."
More migrants are buying property before gaining residency
Australia is expecting a record-breaking number of migrants this year, with 400,000 people entering the country in net terms (measured by counting overseas migrant arrivals and subtracting long-term departures from Australia).
This is a catch-up from the pandemic and is expected to be temporary. The budget forecast for 2024–25 is 260,000, closer to the recent historical average of 235,000.
Most of the increase is attributed to the return of overseas students, skilled temporary visa holders and working holiday-makers.
Helia Singh ran a mortgage broking business out of Perth for 20 years, but in April switched to becoming a wealth coach.
She's noticed a growing trend of migrants moving to Australia on business visas and then using their wealth to purchase property locally, often before they become permanent residents.
She says there's also expats looking to return to Australia after the pandemic.
"Overseas migration plays a big role in the property market and the trend of people who are buying — whether they are buying as an owner-occupier or as an investment," she says.
She says her clients are "people who've got money" who want to live in capital cities where they work.
"Most of my clients are coming from Hong Kong, China and Middle Eastern countries, especially Iran and Syria," she says.
"I've seen a trend of people coming from Brazil as well. They've already got the money and the majority of them are professionals and skilled migrants.
"They are looking to establish a business here, and they have to bring a very good amount of money here to invest and start a business. So hence, it's much easier for them to get into the property market.
"They are bringing about at least $400,000 to $500,000 as part of their visa requirement, and they are happy to invest at least half of that into the property market to buy their own home."
Peter Li is a real estate agent working out of Chatswood in Sydney, with a company that also has offices in Shanghai targeting foreign buyers.
Like Ms Singh, he notes that many are migrants working towards permanent residency or who have gained residency, and that the "overseas bank of mum and dad" helps them secure property.
"The mum and dad bank of Chinese students are very rich .... and they're supporting their children to secure property," he says.
"They are not just the mum and dad bank; they are also the mum and dad financial adviser."
Mr Li says they typically "will secure the property before they even have the actual permanent residency 100 per cent granted, just so that they have a sense of security".
"Because in the Asian, especially Chinese, mentality you know we don't want to rent … we need to own something," Mr Li says.
He says the Chinese families of people studying or working in Australia send money in increments, which the locally-based students/workers then use to put down deposits and purchase real estate.
"You can't transfer $1 million from overseas to Sydney one day, it doesn't happen, you need to break it up and then slowly get it over," he says.
But the agency also services foreign buyers who make investments here.
Mr Li says about 20 per cent of his firm's clients are overseas buyers from mainland China, Hong Kong, Malaysia and Indonesia who are wealthy, and enquiries from this group of overseas buyers has increased by 30 per cent over the year to date.
Are foreigners making a big share of residential property purchases?
Despite the overseas bank of mum and dad, according to official data on foreign buyers (which includes purchases made by non-residents living locally), they make up a tiny fraction of purchases.
Simon Writer, of Treasury's foreign investment division, told a Senate estimates hearing that, in 2021-22, there were 588,176 sales of residential dwellings in Australia, of which less than 1 per cent went to overseas buyers.
But the value of transactions is high. According to published FIRB figures, from July 1, 2022 to March 31, 2023, foreigners were approved to buy 4,643 residential dwellings (70 withdrawn) worth $5.9 billion.
That compares to 5,433 approved foreign buyer transactions (144 withdrawn) worth $7.6 billion in 2021-22 and 4,327 (455 withdrawn) in 2020-21 worth $5.7 billion.
China is the biggest source country, accounting for about 38 per cent of the approved number of investments by number and value.
It's followed by buyers from Hong Kong.
The trend is set to continue according to a report by Chinese international property portal Juwai. It suggests that Chinese demand for Australian and other international real estate will increase as Chinese nationals have a large pool of savings to invest.
In the first nine months of 2022 alone, it says official statistics show Chinese savings deposits soared in value by 26.3 trillion renminbi ($5.43 trillion).
"There's still quite a bit of room to grow in terms of the number of people travelling from China to Australia," Mr Li says.
"And if that's the case, I will say there's definitely going to be more inquiries and more buyers coming from Asian countries like India, Malaysia, Singapore, and … China, to Australia."
He says the type of properties desired by overseas buyers are also changing, with many of them opting for apartments or townhouses that have four bedrooms.
More buying interest from those downsizing and first home buyers helped by parents
Other real estate agents are seeing another trend. They report that during the pandemic they mostly saw investors buying up property, but now there's a new dynamic.
"There's two strong groups of buyers that we've got at the moment," says George Pangalos, a senior sales consultant and auctioneer with Jellis Craig.
"We've got young couples — first home buyers that are getting money from the bank of mum and dad."
"And then you've got your older retirees, people who are downsizing, taking the money that they get from selling their large home, buying a single level home that they can downsize to and putting the rest either into super or helping the kids."
Mr Pangalos says there is still some investor interest, but they are not the majority.
"The strongest buyers that we've got at the moment are the owner occupiers, but you're seeing a few investors come in just because of the high rental returns due to the interest rates at the moment — rental prices have gone through the roof," he observes.
"There are a few developers with an appetite still to purchase and build. But the strongest buyers are owner-occupiers."
Data from PEXA shows many retirees are purchasing their homes with cash outright. Its analysis looked at residential property purchases in the eastern states of New South Wales, Victoria and Queensland over the period January 2019 to March 2023.
It found the total value of residential sale settlements in the nation's eastern states was $478.6 billion in 2022, with $122.5 billion worth cash funded. This was similar to 2021 ($124.8 billion), but up 46.5 per cent compared to 2020 ($83.6 billion).
PEXA's chief economist Julie Toth says the drop in overall settlements was driven by fewer buyers who required a home loan, meaning that cash buyers — the majority of which were older Australians looking to downsize or retire — as a proportion of overall increased.
She says rising interest rates have not deterred this segment from purchasing property.
"When those people move home, when they trade up or down, they typically don't need a mortgage," she says.
"And this speaks to the distribution effects of the interest rate changes that we've seen, because this group is largely unaffected by interest rates when they're making those decisions to move.
"Although there are a few in the more expensive areas, the majority are in those median price bracket, regional retiree areas.
"We also see a cluster in the inner cities. So Melbourne postcode 3000, and the same for Sydney postcode, and some of those very inner suburbs are also scoring quite highly with the cash purchase group."
Thomas Lindeman falls into this category. He and his wife recently sold their home and on Saturday purchased a smaller one in Doncaster in Melbourne's east.
They were bidding against other retirees looking to downsize, as well as first-time buyers and won out at an auction on Saturday.
"We're empty nesters looking to downsize," he says, noting they had helped their younger daughter purchase a home last year before deciding to sell their own.
The couple looked at more than 70 properties, including townhouses, before securing the single-level four-bedroom home for $1.61 million without a mortgage.
"It's certainly a huge relief. And it's nice to get the property within the range we were sort of looking at," he says.
Ms Toth says others who don't have cash and must take out a home loan are lowering their expectations of what they can afford to buy.
Another report from PEXA released on Tuesday, looking at the number of property settlements for the 2023 financial year, shows there were about 665,000 settlements nationally, over the year, down by 18 per cent from the prior year but still above pre-COVID levels.
"They're looking for cheaper homes, where possible, possibly downgrading their expectations in terms of what they're buying — so buying smaller, buying further out, so that they can get into the market," Ms Toth says.
CoreLogic data shows the combined capitals saw 1,729 homes taken to auction last week, returning a preliminary auction clearance rate of 70.7 per cent.
Despite three weeks of decline, the preliminary clearance rate has continued to hold above 70 per cent for the past 12 weeks.
But with more rate rises on the cards, buying a home will get tougher.
"We are looking at possibly another one or two cash rate rises from the RBA because inflation is coming down but it's still a long way above their target range of 2 to 3 per cent," Ms Toth says.
"That said, the property market has already begun to recover despite the rate rises. And I think that will continue … provided we don't see unemployment tip higher."
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