With about one out of four developments bought by foreigners, it is possible that sales of new residential properties to offshore buyers could be much higher than what local banks estimate, according to ratings agency Fitch Ratings. This could raise risk for banks and the economy.

Fitch Ratings’ Andrea Jaehne claims that there was an increase in foreign buyers since 2010, with data from the Foreign Investment Review Board showing an eightfold increase in approvals up to 2015. It is difficult to know the true number of properties sold offshore because there is no required approval for foreigners buying apartments off the plan.

“The condition is they have to market the property into the local market, but often you find them selling it off in Hong Kong, Singapore, and Shanghai,” Jaehne said in a Sydney conference yesterday. “We don’t have a full picture of who is buying this property.”

Foreign buying in some pockets of Sydney and Melbourne is believed to be much higher than the 25 per cent conservative estimate of most banks, with up to 80 per cent of some apartment developments sold directly to offshore buyers.

Regulators and banks have responded to concerns about foreign buyers pushing up property prices by restricting lending for investment properties. This led to dwindling Chinese investors, despite the fact that around 250,000 new apartments are set to hit the market over the next two years.

“Vendors aren’t as confident as they were 12 months ago,” said analyst Cameron Kusher from CoreLogic RP Data. “The rate of price growth is slowing, and people are holding out until the election is done, and then after that, they’ll hold out until spring.”

As a result, Fitch has issued a rare downgrade of five residential mortgage-backed bonds.