The explosion of foreign money in Australia’s property market, in one stunning chart

How much interest has their been from overseas buyers in the Australian property market? This much:

Source: UBS

The annual report of the Foreign Investment Review Board shows the approvals for housing investment reached a record $61 billion in the financial year 2014-15. That was up 75% on the previous year, which itself was up 102% on the year before.

This is only approvals, so there’s no way of telling what this actually turned into in terms of real purchases, but it’s still fair to assume that foreign purchases of Australian property ran into tens of billions of dollars last financial year.

UBS economists George Tharenou, Scott Haslem and Jim Xu analysed the FIRB data and compiled the chart above. From their report:

Importantly, the majority of applications remains directed towards the ‘new’ (rather than ‘established’) housing market. At $49bn in 14/15, new represented an 81% share of the total (of which a 75% share of new was in NSW and Victoria alone). While it’s unknown what precise proportion of these approvals actually ‘transact’ into sales (noting our prior channel checks suggested a ~1-in-3 ratio) – these FIRB data represent 82% of official ABS residential building approvals of $60bn in 14/15. But this likely overstates ‘activity’, and using a 1-in-3 ratio, this would imply a (still very high) foreign share of new housing around ~30% (& even higher in CBD apartments).

So in CBD apartment complexes, one-third and probably more of the apartments are being bought by people from overseas.

Some of the increased registration activity may have been driven by the Abbott government’s bolstering of the FIRB regime in 2015. Treasurer Joe Hockey lowered thresholds for registration, increased penalties for non-compliance and beefed up FIRB’s resources.

But when foreign buyers are accounting for this much of new housing purchases it destroys any argument that overseas buyers are not a significant force in the domestic property market, and perhaps provides some comfort that not all of those new apartments being built on every spare corner of city streets are being paid for by geared-up local investors.