According to figures from property advisory firm Charter Keck Cramer, four out of every 10 of Melbourne's new apartment purchases are to offshore buyers.
"It's no coincidence we are seeing peak levels of development activity across Sydney and Melbourne coincide with a rising participation of foreign developers and purchasers," Charter Keck Kramer's national executive director Robert Papaleo told The Age recently.
While this is helping fuel a construction boom across both Melbourne and Sydney, it is also creating political headaches for both state governments as well as the federal government.
Roughly 11 percent of all residential properties sold in NSW are being snapped up by foreigners, according to new figures reported by News Corp earlier this year.
The NSW Federation of Housing Associations CEO Wendy Hayhurst has been quoted saying that some investors were buying apartments as investments and then leaving them empty, a move which she says was “obviously driving up prices”.
This issue in part prompted the Victorian government to introduce its vacant property tax, forcing anyone owning a property that lies vacant for over six months to pay an annual tax of 1 percent of the capital value.
Known as the Foreign Purchaser Additional Duty (FPAD), it took effect in mid-2015 and applies from the date when the contract for the property is signed.
So, while Victoria generates an estimated $133 million from this tax, the underlying issues of housing affordability remain fundamentally unchanged.
Data from the Foreign Investment Review Board indicates that while most of the foreign housing investment in Australia goes into NSW and Victoria, a 2016 Treasury paper found its overall effect on home prices was relatively small.
However, at the same time, research by Griffith University found that a quarter of the price growth in both Melbourne and Sydney, between 2004 to 2014, was directly due to foreign investment.
Reports such as these have forced the Turnbull government to act and in turn, prompted federal treasurer Scott Morrison to push through several changes in May’s federal budget.
These changes include a 50 percent cap on foreign buyers in new developments, a vacant property levy and capital gains tax changes for foreign residents.
As for Melbourne, the effect of this high rate of foreign apartment ownership is, according to several sources, one reason why the city has grown by nearly a million people since 2006.
Speaking to Fairfax Media recently, AMP Capital economist Shane Oliver pointed out that a blanket ban on foreign buyers was not the answer and would have a “negative impact” on the market and “could see apartment prices fall by up to 30 percent”.
Despite all this, Melbourne was once again voted the world’s most liveable city by topping The Economist's liveability index, although according to the index, housing affordability was not considered.