This investment has been blamed in some cities for pushing up house prices for ordinary residents. Our data suggests that this is not the case, however, as both New York and Sydney have seen high price rises in recent years, despite restrictions on foreign ownership. Instead, the signs are that investment pushes up prime property values rather than mainstream values.
Mainstream properties generally have, on average, seen growth of 58% across the 12 cities since December 2008. Most of this growth has been associated with economic recovery in the second half of that period, with 33% occurring between December 2011 and June 2015.
Growth in prime markets has actually been lower across the 12 cities, growing by an average of 37% over the past seven years. The highest growth (19%) took place in the first half, before 2011, when buyers were more likely to invest capital rather than financing from income.
Mainstream property values are, on average, 19% of prime property values in our 12 cities (see fig. 12) and are most heavily discounted in internationally invested cities such as Hong Kong, Dubai, Paris and London. US cities have the smallest gap between prime and mainstream values, alongside locally invested cities such as Sydney and Tokyo.
It would appear that international investment is concentrated in prime markets and tends to push up prices in the most expensive echelons of the market. High levels of commercial real estate investment in US cities do result in international investment in multi-family housing, but this would appear to have had a moderating effect on rental growth rather than contributing to price growth in mainstream markets.