(Bloomberg) -- Just how much foreign money is contributing to rising property prices is a staple of dinner party conversations around the globe. Australians now have a near-official answer, and it’s less than most would think.
The Australian Treasury estimates that foreign demand for real estate increased prices in Sydney and Melbourne by no more than A$122 ($90) a quarter from July 2010 and March 2015, and possibly as little as A$80. That compares to an average increase in overall prices of about A$12,800 a quarter, according to a report released Friday by the Canberra-based Treasury.
“Only a small proportion of the strong property price growth over the study period can be attributed to foreign demand,” the working paper concluded.
Australian home prices have increased by more than 50 percent since 2008 in the nation’s largest cities. In recent years that’s been spurred by unprecedented monetary easing from the central bank and a growing population, although increasing amounts of Chinese money have entered the market at the same time. Australia approved A$24 billion of Chinese real estate investments in the year ended June 2015.
Amid rising political concern about the influence of overseas money, some Australian states have begun imposing an extra transaction tax on residential property bought by overseas purchasers.
The working paper from economists at the Treasury suggests though that such concerns may have been overblown. It combined postcode-level data on foreign investment approvals -- something that is not available to the general public -- with CoreLogic Inc. house price data. Although it found there was a statistically significant link between increased foreign investment approvals and prices, it concluded the impact was small.
It does note though that the data may not pick up purchases by local residents on behalf of family members overseas.
While running contrary to public opinion, its conclusions were echoed earlier in the week by the head of one of the nation’s biggest lenders.
“The reality is there is still very, very strong household formation in Australia, and that’s the number one driver of demand,” Shayne Elliott, Australia and New Zealand Banking Group Ltd.’s chief executive officer, told an event in Sydney on Wednesday.
“Foreign investment money has been the cream on the top,” he said.