FIRB study fails to link foreign buyers to high residential price growth
The Department of Treasury's Working Paper into perceived links between foreign investment and residential property price growth has been released with statistics finding the driver of the majority of recent price growth could not be attributable to increased foreign demand.
The study found the majority of foreign residential purchases are of the new property, not existing and foreign demand has accounted for only a small proportion of the increase in property prices over recent years.
The release said other factors such as interest rates, financial deregulation, incomes, demographics [population growth] and the prices of alternative investments, such as equities, have played a role.
"Given that in the short run the supply of residential property is relatively fixed so any increase in demand, whether domestic or foreign, should result in higher prices," it said.
"Indeed, there have been many other significant domestic drivers of property prices over the period examined.
"The majority of foreign investment approvals are for new as opposed to established dwellings.
"This provides some indication that, in the longer-term, foreign demand is increasing property supply consistent with Australia’s foreign investment framework."
Charles Pittar, chief executive officer of Chinese international property website Juwai.com said the Parliamentary Inquiry into foreign investment found the same thing three years ago, although without the impressive statistics.
"The results are no surprise and they confirm what we have said for years," he said.
"Offshore buyers drive huge benefits for the Australian real estate market and economy, as well as billions of dollars of job growth and physical investment in new housing.
"I'm not sure how many minds it will change. For most people, it's just too easy to blame an easily identifiable group like offshore buyers when prices get hot.
"It sounds a bit harsh for the FIRB to say Australian property buyers have a 'herd mentality,' but we certainly love our real estate."
"Most experts believe Sydney and Melbourne are heading for price slowdowns. If we want to keep adding new homes to the supply despite that, then we need to encourage foreign buyers - rather than push them away."
The report can be downloaded here.
