ANZ bank has found that foreign demand has been an important contributor to Australia's recent construction boom and is playing an increasing role in the real estate market.

Key points: Foreign investors purchased up to 60,000 Australian dwellings in 2015-16, about 13 per cent of all residential property sold

Foreign investors purchased up to 60,000 Australian dwellings in 2015-16, about 13 per cent of all residential property sold Up to 25 per cent of newly built homes, mainly apartments, were sold to foreign investors

Up to 25 per cent of newly built homes, mainly apartments, were sold to foreign investors Between 2.5-4pc of Australian homes are owned by people who are not citizens or permanent residents

The bank's study, drawing on Reserve Bank research, estimated that foreign investors purchased between 35,000 and 60,000 dwellings in Australia in 2015-2016.

That would mean foreign buyers accounted for between 7-13 per cent of all Australian property transactions, with that proportion obviously much higher in certain locations popular with overseas investors and lower in other parts of the country.

Using FIRB data and a set of assumptions, ANZ estimated that foreign investors bought between 30,000–50,000 new dwellings in 2015–16, representing between 15 and 25 per cent of newly-constructed dwellings.

"Foreign demand is clearly one of the drivers of the strength in our dwelling investment profile," ANZ senior economist Daniel Gradwell noted.

"If this demand were to dry up suddenly, Australia's construction pipeline would likely be notably weaker than currently expected."

The bank concluded that, if foreigners are buying around 25 per cent of new apartments, this suggests around 80 per cent of foreign purchases are apartments and the remaining 20 per cent are houses, with an average price of $620,000 nationwide for 2015-16.

ANZ's conclusions have been reached after analysis of Reserve Bank and Foreign Investment Review Board (FIRB) data.

The bank has assumed that 30-50 per cent of FIRB approvals result in property purchases.

Foreign owners hold up to 4pc of Australian housing

While foreign buyers make up a significant share of new home purchases, they represent a lower share of total market activity at between 7-13 per cent of turnover.

While this suggests foreigners have not been the primary driver of property price growth in recent years, they have had an impact.

"The purchase of 7–13 per cent of total sales each year is not as significant as the share of new construction," Mr Gradwell observed.

"So the impact on overall prices is likely to be less than the impact on construction."

ANZ also estimates that foreigners own between 2.5 per cent and 4 per cent of Australia's housing stock which is significant, especially considering that the current rate of foreign buyer activity is much stronger than in the past.

However, Mr Gradwell said it would probably take a significant exodus of foreign owners to cause a substantial home price fall.

"Around 5 per cent of Australia's housing stock is bought and sold each year," he wrote.

"This means that only a large shock, causing a high share of foreign owners to sell their Australian property, would be significant enough to drive sale prices lower."

The bank cautions that this analysis is based on Foreign Investment Review Board numbers dating back to 1995- 1996.

The wide range of estimates reflects uncertainty about the extent to which foreign buyer approvals convert to actual purchases.

FIRB data shows that in 2015–16, 40,100 property purchases by foreign buyers were approved, valued at $72.4 billion.

Foreign purchases have risen sharply in recent years, led by Chinese purchasers, with the value of approvals granted in 2015–16 three-and-a-half times greater than just five years ago.

On ANZ's estimates of absolute numbers, most foreign activity in new housing in 2015–16 was in Victoria, where overseas purchasers accounted for 25-35 per cent of new builds sold.

But the share could be higher in Queensland, where ANZ estimated it was between 25 and 35 per cent.

In New South Wales it was 15–20 per cent.