Westpac’s chief economist, Bill Evans, has warned that “huge uncertainty prevails in this market” after the recent rise in building approvals, hence continuing Australia’s high rise construction boom.

“The number of high rise apartments currently under construction in March this year has surged to 111,000 – including 44,000 in New South Wales; 34,000 in Victoria; and 23,000 in Queensland,” said Evans in a statement.

But there is an underlying cause to the construction boom, as Chinese buyers’ heavy involvement in the market has also propelled the building boom in recent years, together with the increase in the number of housing investors.

A recent ANZ survey revealed that foreign investors accounted for 23.9% of all property sales in Australia during the June quarter and most of these foreign investors were Chinese. This creates a heightened risk should Chinese investor buying start to dry up.

“At some point, the Chinese authorities, who appear to have stabilised last year’s spectacular near USD 1 trillion loss in foreign reserves, may decide to slow this leakage,” said Evans.

“Certainly we have seen marked evidence of a tightening of capital controls, particularly for the non-corporate sector. That tightening of capital controls might also impact the construction boom.”

Another thing that adds to the uncertainty is the fact that banks have stopped funding FIRB buyers, which might “discourage foreign buyers, with the result of sharply slowing the apartment construction cycle.”