Is foreign money inflating property prices?

From the SMH:

Foreign buying of Australian residential property has moved sharply higher in NSW over the past three months.

For the three months to September 30, 16 per cent of new property was bought by foreigners from 11 per cent in the previous quarter.

Queensland’s share of foreign buyers in new property has remained steady at 20 per cent – the highest in the country. In 2010, the foreign-investor share of new properties was about 8 per cent in Queensland and NSW.

Foreign investors are allowed to buy newly-built real estate, such as off-the-plan apartments, with no restrictions.

NAB group chief economist Alan Oster said the level of foreign buying of new property ‘‘has gone up a lot in recent years’’.

…with a real estate market in Australia worth about $4 trillion, foreign buyers are unlikely to be influencing median house prices, Mr Oster said.

‘‘But no one really knows because a lot of foreigners do not need Australian banks and the only way that we can get data is to ask the experts in the market what they think it is,’’ he said.

This material is derived from the NAB property survey we published earlier today. It says:

Foreign buyer activity in the new property market also seems to have leveled out at around 12½%. Queensland remains the preferred location for foreign investors, who accounted for 20% of new property demand in Q3. Property professionals also noted a pick up in foreign investor activity in NSW (16%), which offset a decline in foreign investment activity in Victoria (11%).

Anecdotal evidence via John McGrath is that foreign buyer activity has been influential on prices in Sydney. It would be nice know for sure; another regulatory failure in the great Australian housing bubble.