Foreign Buyer Ban Fails to Boost New Home Investments

Foreign residential property approvals in Australia have fallen to their lowest level in three years, raising questions about whether current foreign investment settings are successfully redirecting overseas capital into new housing supply.

Treasury’s latest 2025–26 figures show a clear slowdown in residential approvals. In the June quarter alone, approved residential real estate proposals totalled just $0.9 billion across 656 proposals, continuing a weaker trend seen through the financial year.

This decline comes as Australia maintains strict limits on foreign purchases of established homes. The Federal Government has extended the ban on most foreign purchases of established dwellings until 30 June 2029, while continuing to allow limited exceptions that support additional housing supply.

The policy is intended to steer foreign buyers toward new dwellings, off-the-plan projects and development opportunities rather than existing homes. However, weaker approval volumes suggest that lower demand for established property has not automatically translated into stronger foreign investment in new residential construction.

For Melbourne’s western growth corridor, this could have important consequences. Large developments often rely on strong pre-sales to secure finance and progress from planning into construction. If overseas demand continues to weaken, some developers may find it more difficult to achieve the sales targets needed to move projects forward.

That could mean slower delivery of new apartments, townhouses, house-and-land packages and master-planned communities in parts of Melbourne’s west.

For local buyers, weaker foreign demand could reduce competition for some new properties in the short term. Developers may offer more incentives or become more flexible on pricing where sales momentum needs support.

The longer-term picture is more complex. If fewer projects become financially viable because pre-sales decline, housing supply could eventually tighten, particularly in fast-growing areas where population growth remains strong.

Investors should also be cautious about assuming that lower foreign demand automatically means lower prices. Construction costs, land prices, finance expenses and infrastructure delivery will continue to influence the final price of new housing.

The Federal Government maintains that the established-home ban is intended to reduce competition for existing housing while new supply is delivered, and it has also introduced measures aimed at speeding up development and reducing land banking.

For Melbourne’s western growth corridor, the key issue will be whether domestic buyers, first-home purchasers and local investors can provide enough demand to replace the decline in overseas approvals.

Overall, weaker foreign residential investment may create better buying conditions in selected new developments today, but if the trend contributes to fewer projects proceeding, it could also place pressure on future housing supply. That makes the balance between investment demand and new construction particularly important for Melbourne’s west.