The Effect of Foreign Demand on Residential Property Prices: Evidence from Australia

This study estimates the impact of foreign demand for Australian residential real estate on property prices. Using postcode-level administrative data and fixed-effects regression techniques we find a positive relationship between foreign investment approvals and price growth. Our analysis suggests that, on average, foreign investment contributed between $80 and $122 to quarterly price growth in Sydney and Melbourne between July 2010 and March 2015. This is a small proportion of the increase in property prices over the period.