A new survey by National Australia Bank has found the proportion of foreign investors buying new properties has fallen to a two-year low.
Foreign investors are buying a smaller slice of Aussie real estate.
The latest NAB residential property index found while house price growth eased between April and June, so did interest from overseas buyers.
The proportion of foreign buyers of new properties fell from a high of 13.9 per cent in the first three months of the year to 10.2 per cent – the lowest share in two years.
Foreign buyers were most active in Victoria, accounting for a new high of one in six purchases.
Demand from foreigners for existing properties also weakened across all states, with the drop felt most in Victoria and NSW.
Resident owner-occupiers accounted for the largest share of new property sales (just under 40 per cent), while about a third of sales went to local investors.
The findings come amid a parliamentary inquiry into foreign property investors, who have been blamed by some for fuelling prices and pushing out first home buyers.
The Reserve Bank has told the inquiry that rising prices in the past year have been driven by record low interest rates and a growing population rather than foreign investors.
In the market for established properties, NAB detected a rise in first home buyer activity during the second quarter, particularly in Western Australia and Victoria.
High on all buyers’ wish lists were inner city and middle/outer ring homes.
Overall, house price growth eased to 0.9 per cent in the second quarter from 1.7 per cent at the start of the year.
NAB expects both prices to cool further in the next two years and demand to weaken across most segments – except for middle/outer ring low-rise properties, inner city high rise and CBD apartments.
“NAB expects average capital city house prices to cool further over the next two years towards more sustainable levels and is forecasting average house price growth of 4.6 per cent through the year to June 2015 and 3.2 per cent in the year to June 2016,” NAB said on Thursday.
Price growth is tipped by NAB to be strongest in Brisbane, Sydney and Perth in the next year, with slower growth forecast in Melbourne and Adelaide.