Foreign investors are not pushing first home buyers out of the property market, a central banker says.
Rising house price rises in the past 12 months have been driven by low interest rates and a growing population rather than foreign investors, Reserve Bank of Australia assistant governor Christopher Kent told a parliamentary inquiry.
Prices have grown across the country, including cities or pockets of cities that do not typically attract foreign investors, Dr Kent said.
"The information available suggests that foreign residential purchases have probably not had a large direct effect on the price of housing that is typically purchased by first home buyers," Dr Kent told the hearing in Sydney on Friday.
The inquiry into foreign investment in residential real estate has previously heard first time buyers typically buy established properties, while foreign investors are only allowed to buy newly constructed property or off-the-plan.
Dr Kent said foreign demand was concentrated in high density apartments in inner city Sydney and Melbourne, close to universities.
It was possible foreign demand was affecting prices in certain segments of the market, but it was hard to know what the impact was, if any, Dr Kent said.
"My own sense is that it's probably had a marginal impact but you just can't say definitively how much," he said.
"Supply sometimes takes time to catch up to demand.
"Often you need the prices to go up so developers say `now it's profitable, it's worth me building more units in inner city Sydney and Melbourne'.
"That can mitigate that price effect."
Dr Kent said the RBA was not concerned about property price rises over the past year.
Supply was just catching up to demand following a period of slow construction, relative to population growth.
Concern would be raised if a long, sharp spike in house prices continued, but the growth rate had already begun to slow, he said.
Foreign investment supported local construction, while foreign-based developers added competition and provided access to alternative sources of financing, Dr Kent added.
"Foreign residential demand in Australia is linked to the rise in income and wealth globally, but particularly in Asia, which is adding to business opportunities as our economy becomes more integrated with others in the region," Dr Kent said.
"This is welcome and to be expected."
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