Sydneysiders are concerned that foreign investors, and particularly Chinese real estate investors, are pushing up housing prices, according to survey findings published this month.

A majority believed foreign investors should not be allowed to buy residential real estate in Sydney.

The federal budget was the Government's latest attempt at navigating a policy solution that supports its pro-foreign investment position while responding to public concern about housing affordability in Australian cities.

China's Government is also searching for a policy solution to restrict the large amount of capital that's flowing out of the country. But the Chinese crackdown "doesn't appear to be working".

We surveyed almost 900 Sydneysiders to investigate their views on foreign real estate investment.

The effectiveness of government regulations on foreign investment and investors was a major concern for respondents.

Views on government regulations

The survey obtained the views of people aged over 18 living in the Greater Sydney region.

They were asked about housing affordability, foreign investment, the drivers of Sydney housing prices, and perceptions of Chinese investors specifically.

Support for the Government's regulation of foreign investment in housing was weak. Only 17 per cent of respondents thought it was effective.

Almost 56 per cent of participants believed foreign investors should not be allowed to buy residential real estate in Sydney.

Only 18 per cent believed this should be permitted.

More than 63 per cent of participants disagreed that "government should encourage more foreign investment in greater Sydney's housing market".

Only 12 per cent of participants agreed with this.

These views stand in stark contrast to the federal and state governments' geopolitical support for foreign investment in Australia.

Views on foreign investors

There is little fine-grained data about the impacts of foreign capital and investors on specific neighbourhoods and developments in Australian cities.

Therefore, we did not set out to compare public attitudes against the empirical evidence on the effects of foreign real estate investment in Sydney.

What's significant about the survey results is that Sydneysiders have strong views on foreign investment, despite the absence of reliable evidence.

Participants' concerns about foreign investors and investment were consistent with their concerns about the government's foreign investment rules.

About 63 per cent of Sydneysiders identified the Chinese as the heavyweights of foreign investment. This is likely to be accurate, given the concentration of Chinese investment in Sydney and Melbourne.

When presented with the statement "I welcome Chinese foreign investors buying properties in my suburb," more than 48 per cent of participants disagreed.

Other studies, however, have shown the potential for public confusion between domestic Australian-Chinese and international Chinese buyers.

Views on the drivers of housing prices

Respondents were asked to choose up to three drivers of house prices based on their understanding of Sydney's housing market.

By far the most commonly nominated driver of house prices (64 per cent of respondents) was foreign investors buying housing.

Roughly one in three survey participants saw low interest rates (37 per cent of respondents) and domestic home owners (32 per cent) and investors (32 per cent) as the drivers of higher housing prices.

Local housing analysts generally agree with this.

But more than three in four participants (78 per cent) agreed with the statement "foreign investment is driving up housing prices in greater Sydney".

When framed inversely, as "foreign investment has no impact or very small impact on greater Sydney's housing market", more than two-thirds of participants (68 per cent) disagreed with the statement.

Only 6 per cent of our participants disagreed that foreign investment was increasing real estate prices.

About 11 per cent agreed that foreign investment had no or minimal impact.

Views on housing supply and affordability

We expected people to report that foreign people and capital are driving up housing prices and making it more difficult for Australians to compete in the housing market.

But we were surprised by the findings about Sydneysiders' views on foreign capital and housing supply.

A strong message from the real estate and property development industries is that foreign investment increases housing supply, which in turn puts downward pressure on prices.

Politicians and lobby groups argue this will help improve housing affordability in major Australian cities.

But many housing analysts argue that this supply solution does not stack up for purchases made by either foreign or domestic investors.

It seems that Sydneysiders don't accept the real estate industry message about foreign investors increasing housing supply, and therefore helping to ease housing affordability pressures.

When asked if "foreign investment can help increase housing supply in greater Sydney," 48 per cent of participants disagreed with the statement.

Another 25 per cent "neither disagreed or agreed".

An unresolved policy dilemma

The Federal Government's dilemma is how to manage foreign investment alongside an increasing housing affordability problem in major Australian cities.

This month's federal budget included a crackdown on foreign investors, but the Government still supports foreign real estate investment.

Our survey results support other studies that suggest this pro-foreign investment stance must be accompanied by strategies to protect intercultural community relations.

This must happen alongside efforts to improve housing affordability.

Dallas Rogers is a senior lecturer at the University of Sydney's Faculty of Architecture, Design and Planning

Alexandra Wong is an Engaged Research Fellow at Western Sydney University's Institute for Culture and Society

Jacqueline Nelson is a Chancellor's Postdoctoral Research Fellow at the University of Technology Sydney

Originally published in The Conversation