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Experts at Odds Over the Cause and Effect of Australia’s Overpriced Property Market - 1 June 2010

While some real estate experts are reporting drops in overseas interest in Australian property over the last year due to high currency exchange rates and rising home prices, economists within the country are citing the opposite—sales by foreigners are actually underreported and prices are high because of the influx of foreign investment.

In a recent report, several overseas property portals said they’ve experienced significant drops in searches for Australia from April of last year to this year—an anomoly as interest in other traditionally popular holiday spots, like Spain, France and Italy, are on the upswing. Experts say that Brits are showing less interest in the country because the exchange rate from the pound to the Australian dollar has dropped significantly—£1 to $1.75, when it was once £1 to $2.40.

Australian critics of the inflated, unaffordable housing market are saying that more foreigners are buying property than being reported. Last year, the Australian government changed reporting rules so foreigners no longer had to notify the Foreign Investment Review Board (FIRB) if the property being bought was to be their principal residence.

According to a recently released FIRB report, foreigners bought $14.9 billion worth of property in Australia last year, and 4,827 real estate approvals were issued, numbers that seem inaccurately small to critics. The greatest number of investors came from Singapore, one of the most prosperous economies in the world, followed by the U.S. and the U.K.

To help correct the overpriced property market, the Australian government said it plans to curb foreign investment. Officials recently announced a stricter approval process for foreign buyers, where they will have to sell when they leave the country or face heavy penalties.

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