Sydney real estate: Where foreigners are really buying homes in Australia

House prices have been surging by double-digit figures in the key cities where foreigners have been snapping up property, latest data has revealed.

Sales of newly-built homes to foreign buyers reached a six-year high at the end of 2023, with Sydney and Perth values soaring during the past year.

Prices in those states with stronger overseas interest have kept rising despite the most aggressive interest rate rises in a generation.

Commonwealth Bank’s head of Australian economics Gareth Aird said more foreigners were buying real estate as strong population growth pushed up prices.

‘Foreign buyers are more active in the market,’ he said.

Foreigners who don’t live in Australia are only allowed by law to buy brand new freshly-built properties.

But international students can buy a place to live in while they study, provided they sell it within six months of graduating and returning home.

Sydney, which receives a bigger share of overseas migration, saw its median house price surge by 11.7 per cent in the year to February, sending it skyward towards an even more unaffordable $1,395,804.

The new CoreLogic data, released on Friday, showed apartment values climbed to $837,253, up 7.8 per cent year on year ago, to a level which is unaffordable for an average-income earner on a $98,218 salary.

Foreign buyers primarily target homes in New South Wales, with overseas investors taking a 15 per cent market share in the December quarter, National Australia Bank’s residential survey showed.

Mining-rich Western Australia was next, with foreigners having a 14.2 per cent market share.

Both were well above the national average of 11 per cent of new property bought by foreigners in December quarter.

The share of foreign buyers rose for the fifth straight quarter to a six-and-a-half year high, with transactions now five times higher than 2021 during the Covid border closure.

‘The overall result suggests there has been a near five-fold rise in foreign buyer market share in new Australian home markets since hitting a low of just over two per cent during the Covid-pandemic in mid-2021,’ the NAB report said.

This occurred after net overseas migration reached a record-high of 518,000 in 2022-23, during a time of rising building costs.

‘Recovery has occurred against record migration and reports of China’s post-pandemic reopening sparking a surge of foreign interest in Australian housing, with international agents reporting a rise in enquiries of over 400 per cent,’ NAB said.

‘Construction costs and higher rates still considered the main barriers to starting new housing projects in Australia.’

Perth has been Australia’s best performing capital city market during the past year with the median house price soaring by 18.6 per cent in the year to February to $718,560.

Australia’s most affordable capital city apartment market also saw its median unit price climb by 15.9 per cent to  $482,972.

In Victoria, foreigners had a smaller 10 per cent share of the new home market.

Melbourne’s median house price rose by a more subdued 4.4 per cent over the year to $942,779.

But the link between more active foreign buyers and surging house prices is limited, with interstate migration also a factor.

Brisbane’s median house price soared by 15.7 per cent in the year to February to $899,474.

But in Queensland, foreigners have a much smaller 6.3 per cent share of the new housing market.

Treasurer Jim Chalmers and Housing Minister Julie Colllins last month announced tax hikes for foreigners buying property.

Juwai IQI, which markets property to wealthy Asian investors, said foreigners were now waiting to become a permanent resident so they could buy a home without having to seek approval from the Foreign Investment Review Board.