With plenty of talk about a housing bubble and home values climbing much higher in Sydney and Melbourne, housing is looking expensive to many Australians.
Low interest rates and the strong gains in certain areas are making residential housing investment quite attractive for some which is one of the drivers resulting in increasing home values.
While housing may be looking expensive to locals, the declining Australian dollar means that it may be looking more attractive to foreign buyers.
Since combined capital city home values reached their most recent low point in May 2012 they have risen by 26.8%.
At the same time the Australian dollar has fallen by -13.3% over that period in trade-weighted index terms.
While the depreciation in the dollar has no impact on local buyers, for off-shore buyers the fall in the Australian dollar is likely to make Australian housing even more attractive.
Furthermore, the Reserve Bank continues to state that there is a need for an even lower dollar which would exacerbate the relative affordability even further.
Foreign buyers are meant to be purchasing brand new homes in most instances
There have been numerous recent reports of foreign buyers not adhering to these rules.
Furthermore a recent parliamentary inquiry found that the Foreign Investment Review Board was significantly underfunded and as a result has not been able to effectively monitor and enforce foreign investment rules.
Combined capital city home values have increased by 26.8% between May 2012 and June 2015.
Keep in mind that these figures are heavily influenced by the Sydney and Melbourne housing markets with these the only two capital cities recording value growth in excess of this figure over the period.
When you look at that 26.8% increase across other currencies you can see the impact of the falling exchange rate.
Of those currencies highlighted only the Japanese Yen and Indonesian Rupiah have seen values rise by a greater amount.
Across most other currencies the relative value rises have been significantly lower than they have been in Australian dollar terms.
Once you look at capital cities that have seen relatively lower recent capital growth, there has been a significant improvement in Australian housing affordability for foreign buyers.
Not to mention the fact that in many of these foreign countries mortgage holders are borrowing at significantly lower interest rates than those available to Australians.
With the RBA stating that the Australian dollar remains overvalued, any further falls in the Aussie dollar are likely to result in even more attractive buying conditions for foreign buyers.
Given this it is imperative that foreign investment rules are tightened and FIRB improve their surveillance work.
A central register of foreign buyers would also be seemingly important.
The Victorian Government has recently announced that it will increase fees and charges to foreign buyers of property in that state.
Despite howls of protest it would seem that this is likely to have little material impact on foreign demand for housing.
Furthermore, a national approach similar to this would be a good step towards appropriately funding FIRB to undertake their review and surveillance of foreign housing investment.
Particularly given that should the dollar fall further demand from off-shore buyers is likely to increase.
The Federal Treasury has now released the Exposure Drafts and Regulatory Impact Statement of legislation designed to tighten foreign investment rules, including those relating to residential real estate.