Foreign Investment in Australian Residential Property Declines Significantly

Foreign investment in Australian residential property has fallen sharply over the past two years, potentially creating new challenges for developers relying on overseas buyers to support new housing projects.

Latest Treasury figures show approved foreign residential investment totalled $4.7 billion in 2025–26. That was 4% lower than the previous financial year and about 29% below the $6.6 billion recorded in 2023–24.

The number of approved proposals has fallen even more significantly. Treasury recorded 2,979 residential approvals in 2025–26, compared with 3,922 a year earlier and 5,581 in 2023–24 — a decline of almost 47% over two years.

For Melbourne’s western growth corridor, this reduction could mean less competition from foreign purchasers for newly built homes and land. That may benefit some local buyers, particularly where developers are seeking to maintain sales momentum.

However, weaker foreign demand can also create challenges for larger projects. Developers often rely on pre-sales to demonstrate demand and secure construction finance, so a smaller overseas buyer pool could affect the feasibility or timing of some developments.

This is particularly relevant because foreign investors are now largely directed toward new housing rather than established dwellings. New apartments, house-and-land packages and qualifying developments therefore carry much of the remaining foreign residential demand.

If international pre-sales decline, developers may need to rely more heavily on local owner-occupiers, first-home buyers and domestic investors to support new projects across Melbourne’s west.

For buyers, this could create stronger negotiating conditions in selected developments, including incentives, upgraded inclusions or greater flexibility on pricing where sales targets need to be met.

At the same time, the long-term effect on housing supply needs to be considered. If lower pre-sales cause projects to be delayed or cancelled, fewer new homes could eventually reach the market.

Treasury also cautions that foreign investment approval figures represent investment intentions rather than completed purchases, so they should not be treated as a direct measure of all foreign-owned property transactions.

Overall, the decline in foreign residential approvals could have two competing effects for Melbourne’s western growth corridor: less buyer competition in the short term, but potentially more pressure on development feasibility if overseas capital and pre-sales continue to weaken.

For developers and investors, the key issue will be whether strong local population growth and domestic demand can fill the gap left by declining foreign approvals and keep new housing projects moving forward.