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Foreign investors not inflating prices: RBA

24 June 2014 Andrew Jennings

An official report by the Reserve Bank of Australia has dismissed fears that first home buyers are being priced out of the market by rising numbers of overseas investors.

The number of foreign investment approvals in the residential sector has remained steady for the past decade, according to the RBA report.

Foreigners are also competing in a different space to first home buyers by generally targeting more expensive properties in inner-city Sydney and Melbourne, according to the report.

The conclusion was that foreign residential purchases “are unlikely to have been the main driving factor behind the recent increase in prices”.

Overseas buyers are generally investing for the longer term rather than speculating, the report said.

They have also been described as “especially helpful” in boosting construction activity during the current stage of the economic cycle.

“On balance, foreign residential demand has probably resulted in an increase in the supply of dwellings in Australia by more than would otherwise have been the case, and hence stimulated construction activity,” the report said.

“However, the inherent sluggishness of the housing supply response suggests some of the increase in foreign demand for housing may have spilled over into higher prices, especially for higher-priced dwellings.”

Foreign investors not inflating prices: RBA
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