Strong foreign investor activity in the property market is propping up the economy, and home prices would be a lot higher without it, ANZ economists say.
More than one in four homes sold in NSW and Victoria are going to foreign buyers, the latest ANZ-Property Council survey reveals.
So it's no coincidence that the outlook for property prices, building activity and employment in the property industry is brightest in those states, the report says.
Investor activity is supporting property sector confidence and should help offset weak business and consumer confidence, and subdued economic activity, it says.
GOTTLIEBSEN: Australia needs to embrace the Asian property boom
"The property sector continues to be the bright spot on the broader Australian economic outlook," ANZ chief economist Warren Hogan said.
"Supported by the weight of investor capital, the property sector is not just creating capital growth, but is expecting to generate employment growth and increased building activity, particularly in the areas that are attracting foreign investor capital such as Sydney, Melbourne and Brisbane."
While foreign investors get blamed for driving up property prices, they're actually playing a crucial role in adding supply and keeping prices under control, ANZ senior economist David Cannington said.
"What foreign investment in the housing market is doing is creating economic growth and employment and it's going a long way to providing some new housing supply, which is essential to keep up with the underlying requirement of strong population growth that Australia is seeing at the moment," he said.
"Without the new housing supply that a lot of foreign investors are providing to the market, prices would probably be running a lot stronger than what they are at the moment."