The Foreign Investment and Residential Property Price Growth report shows that foreign investment has only contributed a very small amount to property price increases in Melbourne, Sydney and Brisbane. The report says, rather than inflating prices, foreign investment into new housing is providing much-needed supply.

"The majority of (property) price growth experienced in recent times does not appear to be attributable to increased foreign demand," the report says. Historically low levels of construction, particularly in Sydney, are more likely to be the cause of strong price rises, according to the report. 

"The relatively low number of building approvals, commencements and completions in the late 2000s (in Sydney) are potential longer term drivers of the recent price growth in Sydney," the report claims.

Low interest rates and strong levels of migration are also likely to be factors increasing prices.

The report quantifies the degree to which foreign investment is likely to have increased property prices in Sydney and Melbourne.

Across Sydney and Melbourne, "foreign demand typically increased prices by between $80 and $122 on average in each quarter," the report says. "This is very small when compared with the average quarterly increase in Sydney and Melbourne property prices over the period studied of around $12,800."

The report says that foreign investment in Australian property is directed into new dwelling, and therefore providing much-needed supply of new housing.

"Foreign investment has contributed to Australia’s sustained economic growth," the report says. 

"The majority of foreign investment approvals are for new dwellings, consistent with Australia’s foreign investment policy for residential real estate which, in part, aims to increase the total supply of dwellings."

See also:

Real Estate Institutes support easing for foreign buyers

Westpac closes the door on foreign property buyers

How to assist foreign purchasers