As property prices continue to surge, there are all sorts of theories being thrown around to explain this growth.

One theory that seems to be gaining some traction is that foreign investors (non-residents and temporary residents) are driving price growth. We have done some research into this claim and have found that foreign investment is unlikely to be a primary cause of growth in the broader market.

The best place to find out about foreign investment in Australia is the FIRB (Foreign Investment Review Board) website. As you can see from the chart below, the FIRB approved 10,118 residential property purchases in 2011/2012.

Source: FIRB Annual Report (2011/2012)

Approximately 8,000 of these approvals will proceed through to a purchase. This number represents approximately 2% of the total properties purchased in Australia over 2011/2012. Hardly grounds for an inflationary boom.

Having said this, there is no doubt that specific suburbs are feeling some competitive pressure from foreign investors. A big driver of this localised demand is a strong desire for quality housing around schools with a good reputation. Food for thought.

As we have mentioned in the past, as long as our population continues to expand, the supply of new property remains low and interest rates remain affordable, property prices will probably continue to grow. Which is good news for those of us already in the market.

You can contact a Smartline Mortgage Adviser on 13 14 97 for home loan advice. Or complete our call request form and we’ll call you!

Michael Daniels, B.Com
Smartline Personal Mortgage Advisers
State Manager NSW & ACT

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