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Foreign Investment and Residential Property Price Growth

Treasury Working Paper 2016-031

Release date: 2 December 2016

Chris Wokker and John Swieringa | Working Paper

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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.

1 The authors work in the Macroeconomic Modelling and Policy Division of Macroeconomic Group at the Australian Treasury. Correspondence to: The Australian Treasury, Langton Crescent, Parkes ACT 2600, Australia. Email:

This paper has benefited from the assistance of Tanuja Doss, Sam Hill, Michael Kouparitsas, Yi Yong Cai, Angelia Grant, Linus Gustafsson, Luke Willard, Hamish McDonald, Nigel Ray, John Lonsdale, Roger Brake, Adam McKissack, Sina Grasmann, Nicole Merrilees, Derrick Calder and David Earl.  We also thank Glenn Otto at the University of New South Wales and Emma Schultz and Markus Brueckner at the Australian National University.

© Commonwealth of Australia 2016

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