Incidentally, I'm not saying foreign investment plays no part in such markets, but that its relative contribution has always been overstated. Adittionally, the policy responses I suggest which address house prices work irrespective of foreign/local mixes for most markets.
If anything it has been understated.
1) House pricing is incredibly demand sensitive. A sustained 10% drop in demand would crash house prices.
2) Local buyers expect capital gains. It is the reason they buy.
Rental returns on Sydney property for example are roughly the same as fixed deposit rates.
Where do buyers expect these capital gains to come from? For the most part from rich foreign investors (and to a lesser degree very wealthy immigrants).
This means a large fraction of the local investment market is also driven by foreign actors.
But I wonder what the percentages are for Sydney and Melbourne. My anecdotal evidence is that foreigners don't really buy outside the capitals, so I expect it to be much higher.
Which would have a stronger effect on property prices, as the capitals tend to drive prices for the smaller towns.
They might not be interested in country towns but they are very interested in booming coastal towns like Gold/Sunshine Coast in Queensland, I'd assume the some would hold in places like Byron Bay and Coffs Harbor.
Nothing like huge population growth to keep the demand for housing up. Sadly the discussion has been so poisoned by the racists and xenophobes (like One Nation etc.) that we can no longer have a rational conversation about it...
Credit Suisse research indicates that "foreigners are acquiring 25 per cent of newly completed supply in NSW and 16 per cent in Melbourne, or 21 per cent if we combine the two states". The total value of new houses in both states was $39 billion over the relevant 12 months.
After the Chinese government cracked down on monetary restrictions (i.e. Citizens of China can normally only convert US$50,000 a year in foreign currency and have long been barred from buying property overseas), Lend Lease reported 30 to 40% of foreign purchases now being cash settled.
Transparency International consider Australia the worst money laundering property market in the world.
Foreign investment, especially for countries which avoided the 2007 housing bubble such as Australia, is a major issue.
A friend will be posting an article on the multiple bubbles he sees in the Australian economy, and property is potentially the most concerning of all given how exposed our banks are to housing loans. We may find Australia finally seeing their house bubble pop like the US in 2007.
http://www.smh.com.au/business/property/australian-property-...
https://www.transparency.org/whatwedo/publication/doors_wide...
Updated to include direct link to Credit Suisse: https://research-doc.credit-suisse.com/docView?language=ENG&...