Independent journalist Tarric Brooker’s claim that foreign buyers purchase as many existing homes in a year as property investors do in a month has stirred debate on Australia’s housing market. The numbers tell a more complicated story. While foreign investment plays a role, it pales in comparison to the sheer dominance of local investors—yet policy attention remains fixated on the former.
Government figures from the Foreign Investment Review Board (FIRB) suggest that direct foreign purchases of existing homes have been relatively small. Even at their peak, they accounted for less than 10% of transactions, and during the pandemic, they dropped to just 3%. In contrast, domestic investors have been behind 35–40% of monthly sales, pushing prices higher. Brooker’s assertion holds up when looking at broader estimates from National Australia Bank (NAB), but the gap between foreign and local activity remains vast.
The federal government’s response has been to make foreign purchases harder. New rules tripled application fees, pushing them as high as $84,000, while vacancy fees doubled to $42,000 annually. This aligns with moves in Singapore and Canada, where governments have taken an increasingly protectionist stance to address affordability pressures. Yet, while these measures bring in short-term revenue—FIRB collected $650 million last year—their impact on the broader market is questionable.
Housing affordability remains a crisis, with only 13% of homes within reach for the average Australian. Median prices in Sydney and Melbourne have surged past $1.2 million, largely fuelled by domestic investors rather than offshore buyers. The real driver of the crisis isn’t foreign money but a tax system that rewards speculation. Negative gearing and capital gains tax concessions keep investors in the game, crowding out first-home buyers. At the same time, a construction slowdown and a 200,000-home shortfall have worsened supply constraints.
The Investor Surge and Lost Opportunities
Investor loans now make up nearly half of all mortgage approvals, underscoring the dominance of domestic speculation in the housing market. Foreign buyers, by comparison, play a minor role in driving up prices, yet their involvement often provides critical early capital for large-scale developments. Critics argue that restricting foreign buyers could stifle demand for off-the-plan apartments and pre-sales, which are often required to secure financing for major projects. Without this capital, developers may struggle to push forward with new housing projects, exacerbating supply shortages.
AMP’s chief economist Shane Oliver has pointed out that the country’s housing deficit, estimated at 200,000 homes, is growing. Construction delays, high materials costs, and labour shortages have made it difficult for supply to catch up with demand. He warns that policies aimed at foreign buyers may distract from deeper structural issues—such as zoning laws and funding for social housing—that have a far greater impact on affordability.
Stakeholder Reactions and Electoral Implications
The timing of these reforms coincides with rising mortgage stress and an election cycle. While tenant advocacy groups welcome the crackdown, arguing it protects local buyers, real estate industry players caution that it may deter much-needed investment. Developers fear losing an important source of funding for new projects, while economists highlight the ongoing issue of domestic investor activity going largely unchecked.
Politically, the measures serve as a strategic move for Labor, allowing them to position themselves as taking action on affordability without tackling more controversial investor tax breaks. However, with housing pressures showing little sign of easing, the effectiveness of these policies remains in question.
Foreign buyers are an easy political target, but their role in the crisis is overstated. Investors dominate the market, leveraging tax perks and cheap loans to outbid owner-occupiers. The crackdown on foreign investment might be popular, but it does little to curb the real issue—Australia’s housing system is built to reward speculation over homeownership. Until that changes, prices will continue their upward march, with or without foreign buyers in the mix.
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