Foreign buyers have only 'slight' impact on property prices, study shows

A study has concluded interest from foreign investors has a only a slight impact on property prices in Sydney and Melbourne.

A working paper by Treasury officials Chris Wokker and John Swieringa released on Friday said compared to the average quarterly increase in property prices of around $12,800 in Sydney and Melbourne, foreign demand increases prices by between $80 and $122 on average.

“Foreign demand has accounted for only a small proportion of the increase in property prices in recent years,” the paper concluded.

Increase from Chinese citizens in Australian property has risen from around 50 per cent of total foreign investment approvals in mid-2010 to around 70 per cent in early 2015.

The study also found the level of applications had not greatly changed since the introduction of fees, meaning there was little evidence to suggest there was a high level of spurious foreign investment decisions before fees came in.

The average number of foreign investment approvals per month for a Sydney or Melbourne postcode was 0.6 per cent or about one approval every two months.

The authors, who looked at approvals from July 2010 to March 2015, said there were some limitations to the study, which may have counted approvals which did not result in actual purchases and purchases by a citizen or permanent resident on behalf of family members overseas.

“Quantifying the effect of these limitations is difficult. It is also important to note that while the results suggest the impact across Australia and the capital cities is small, the impacts in certain areas or at particular times may be more intense.”

Housing affordability is on the agenda for the treasurers’ meeting in Canberra on Friday.

AAP