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Foreign Investment and Residential Property Price Growth

Author

Listed:
  • Chris Wokker

    (Treasury, Government of Australia)

  • John Swieringa

    (Treasury, Government of Australia)

Abstract

This study uses fixed effects panel regression techniques to estimate the impact of foreign demand for Australian residential real estate on property prices. All model specifications find a positive relationship between foreign investment approvals and price growth at the postcode level, but the majority of price growth experienced in recent times does not appear to be attributable to increased foreign demand. This is unsurprising 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. 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.

Suggested Citation

  • Chris Wokker & John Swieringa, 2016. "Foreign Investment and Residential Property Price Growth," Treasury Working Papers 2016-03, The Treasury, Australian Government, revised Dec 2016.
    • Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2016_3
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    File URL: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2016/Foreign%20Investment%20and%20Residential%20Property%20Price%20Growth/Downloads/PDF/TWP_FI_Residential_Property_Price_Growth.ashx
    File Function: First version, 2016
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    Citations

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    Cited by:

    1. Morteza Moallemi & Daniel Melser, 2020. "The impact of immigration on housing prices in Australia," Papers in Regional Science, Wiley Blackwell, vol. 99(3), pages 773-786, June.
    2. Alkan Gökler, Leyla, 2021. "Foreign demand and high-rise luxury housing projects in two Turkish cities: Ankara and Trabzon," Land Use Policy, Elsevier, vol. 103(C).
    3. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Chiu, Alvin, 2019. "Internal and External Determinants of Housing Price Booms in Hong Kong, China," ADBI Working Papers 948, Asian Development Bank Institute.

    More about this item

    Keywords

    Foreign Investment; Residential Real Estate; House Prices;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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