Foreign buyers are flocking to buy Australian property, snapping up one out of every six new homes – and that number is set to get higher.

Foreign demand for new homes surged in the September quarter and is tipped to rise further next year, according to the National Australia Bank’s latest residential property survey.

Overseas buyers accounted for almost 17 per cent of total demand for new properties and in Victoria, they accounted for almost 25 per cent, or one in four new homes, the report said.

Foreign buyers were also more active in the established property market last quarter, accounting for eight per cent of demand.

Again, Victoria led the way, with foreigners accounting for a record high 11.5 per cent of established property demand, the report said.

Those numbers appear to correlate with the data on first-home buyer activity.

First-timers were less active in the established property market last quarter, but fell most sharply in Victoria, to 15 per cent from 22.5 per cent in the previous quarter.


NAB chief economist Alan Oster said first-home buyers were not competing with foreign investors for property, because foreign buyers opt for high-end apartments – “they’re not buying cheap stuff”.

It’s local investors creating the most difficulty for first-timers, he said, spurred on by low interest rates, superannuation changes and a tax system that encourages property investment.

Douglas Driscoll, chief executive of real estate group Starr Partners, says more research is needed to identify the true level of foreign investment, legal and illegal, in Australian property.

“As an industry, we have absolutely no idea as to what level of foreign investment there actually is,” Mr Driscoll said.

“In Sydney, I’ve heard anything from 10 per cent to 40 per cent.”

A recent survey of property analysts at Australia’s biggest banks and property development companies blamed foreign investment as the main driver of soaring property prices in Australia’s main capital cities.


In the Sydney market, 96 per cent of analysts said foreign investment was a significant to very significant driver of increased demand and prices, according to the Australian Property Institute’s bi-annual Property Directions Survey.

While there are restrictions on what properties foreign investors can buy, the Foreign Investment Review Board has been criticised for failing to enforce those rules.

A parliamentary inquiry into foreign investment in residential real estate is due to hand down its recommendations in November. AAP

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