A quarter of all new homes in NSW are being bought by foreigners, with almost 80 percent of them Chinese.
Foreign spending on new housing in NSW and Victoria is running at an annualised rate of $8 billion a year, according to a research note from Credit Suisse.
The bank said the rate in NSW alone was an “extraordinary” $4.9bn a year, the equivalent of 25 per cent of new supply.
The figures come from the results of a Freedom of Information request submitted by the bank.
Almost 80 per cent of the foreign demand in NSW was from Chinese buyers, with the second largest group, buyers from Indonesia, account for 1.7 per cent of offshore demand.
“We think this (the NSW figure) is extraordinary given that current supply is nearing peak cycle,” analysts led by Hasan Tevfik wrote.
Housing campaign could backfire
In Victoria, foreigners are currently purchasing an annualised $3.1bn of housing, snapping up 16 per cent of new supply.
The bank said there had been a noticeable pick-up in foreign capital entering Sydney and Melbourne in late 2016.
The figures come despite the introduction of measures designed to cool the east coast housing markets, including federal FIRB approval fees and taxes on foreign purchases in the two states.
“Our analysis of the new data gives us more confidence that the coming downturn in Aussie housing will be less painful than many fear. We think investors could be overly cautious,” the analysts said.
“While Australian housing is at peak cycle, we believe the pace and severity of the coming downturn will be cushioned by Chinese demand.
“It is hard for many Australians to think of property as a cheap asset, but from a Chinese investor’s perspective, there could be plenty of value in Aussie housing.
“Over the longer term we believe there is good reason to expect more, not less, Chinese demand for Aussie housing.”
The bank has added cement manufacturer Adelaide Brighton to its long portfolio, given its one-third exposure to residential housing in Australia.