Japanese investors surge into Australian property as Chinese sell

Shifting Foreign Ownership Trends

Data from the Australian Taxation Office (ATO) and the Foreign Investment Review Board reveals a significant cooling of Chinese interest in the Australian residential market. By the end of the 2024 financial year, Chinese investors held 23,550 residences nationwide. By June 30, 2025, that number had fallen to 22,272. When accounting for new approvals, estimates suggest nearly 2,800 homes were offloaded during that period.

This exit contrasts sharply with the rise of other Asian investors. Japan-based landlords increased their holdings from 1,168 to 1,711 properties, elevating Japan to the fifth-most prolific foreign owner of Australian homes. Ray White Group chief economist Nerida Conisbee noted that the Japanese influx aligns with a broader trend of institutional investment from large firms, while the Chinese sell-off is likely a reaction to domestic economic pressures.

“It’s got a little bit more challenged economy, and property in particular isn’t as good of an investment given what’s happened in China. And we have actively pushed them out. We know they will look globally, and if there is somewhere with more favourable tax treatment, they will look there.”

Tax Write-Offs and the Rental Ecosystem

Despite the withdrawal of some Chinese capital, foreign ownership remains a contentious pillar of the Australian housing sector. Recent ATO data shows that non-residents claimed net rent losses totaling millions in the 2024 financial year. Over the past decade, these investors have utilized billions in rental losses, billions in interest deductions, and billions in “other” rental deductions to offset tax liabilities.

Real Estate Institute of Australia chief executive Jacob Caine argues that these tax benefits are a functional necessity for the country’s rental supply. With millions of renters, Mr. Caine contends that the market relies on foreign cash to maintain housing stock.

“Like it or loathe it, Australia’s housing ecosystem relies significantly on foreign cash to support it, and to ensure that the more than $7m renters across Australia have access to adequate rental homes. So it’s concerning to see less of that cohort that, in recent decades, have been very active and that has contributed to the health of the Australian property sector.”

Federal Budget Changes and Investor Impact

While the Albanese government has implemented changes to negative gearing and capital gains tax (CGT) benefits, experts suggest these measures will not deter wealthy offshore investors. Tax Institute counsel John Storey noted that the reforms disproportionately affect domestic professionals and tradies rather than international buyers, who are already restricted to purchasing new builds.

The current tax environment allows offshore investors to significantly reduce their taxable profits through these deductions. For example, an investor purchasing a property in Sydney in 2014 and selling in 2024 could potentially use $100,000 in rental deductions to lower their tax bill from $295,650 to $250,650.

As the market shifts, Victoria continues to lead the nation in foreign-owned properties with 16,403 residences, followed by New South Wales at 9,198 and Queensland at 8,465. Whether the surge in Japanese investment will offset the decline from mainland China and Hong Kong remains a key uncertainty for the stability of Australia’s rental market in the coming years.