Foreign Buyers Not Responsible For High Property Prices

By: Alex Dunn: December 9, 2016, Updated: January 21, 2019

A new treasury report has dispelled the idea of foreign investment being responsible for inflated property prices, instead showing investment to be providing necessary supply, especially in both Sydney and Melbourne.

The Foreign Investment and Residential Property Price Growth report showed both cities and Brisbane have had prices pushed up marginally by foreign investment, but foreign demand only increased quarterly prices in Sydney and Melbourne by between $80 and $122. When when compared to the quarterly average increase over the same studied period was $12,800, price pressure due to foreign investment was negligible..

The report also claims that foreign investment is central to Australia’s stable economic growth, citing that much of foreign investment is in new dwellings to accommodate the high migration level in cities like Sydney and Melbourne, where construction has been in recent times has been at historic lows.

The report claims that foreign investment in cities with lower migration levels, such as Brisbane and Perth, has resulted in lower prices for new properties rather than higher prices. This is largely a by-product though of the product being brought to market. Investor orientated new apartments are traditionally less expensive than owner occupiers orientated new apartments. The surge of foreign investors has led many developers to bring attractively (low) priced stock to the market to sell to these investors, which in turn has driven down the medium apartment prices. It is a somewhat artificial reduction in price, as it is a lowering of the average rather than a real drop in prices.

This new investment stock has helped significantly with Brisbane rental supply, with significantly increased supply of rental apartments and a softening in rental prices, all positives for tenants.

Sources:

The Real Estate Conversation – Treasury report shows foreign buyers not causing high property prices

Foreign Investment and Residential Property Price Growth (PDF)

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