Chinese investment in Australian property plummeted by more than 50 percent between 2016 and 2017, as capital controls and new policies to slow down a heated housing market saw the first decline in overall Chinese investment in six years.

The Australian Foreign Investment Review Board (FIRB) released its annual report on Tuesday, showing the effect of property curbs and tighter capital restrictions both in Australia and overseas over the last half of 2016 and the first six months of 2017.

After prices in Sydney and Melbourne surged by 70 and 50 percent respectively in just five years, the FIRB introduced a series of fees and levies on foreign property investors last May, including charges on properties left vacant for more than six months.

The FIRB said purchase application fees were also a major factor in the investment slump – foreign buyers were forced to only apply for properties they were definitely interested in, rather than putting in speculative bids on housing in which they had no real desire to buy.

Measures in China also contributed to the sharp drop in investment, with the State Council saying last August it would limit overseas purchases of real estate, hotels and sports clubs. According to China Daily, China's non-financial outbound direct investment in 2017 from January to November fell 33.5 percent.

Prices in Sydney have now fallen by 4.1 percent in the last 12 months, according to CoreLogic, with a wider average price drop of 1.1 percent in Australia’s five state capitals.

According to the FIRB’s latest report, Chinese investors spent 15.2 billion Australian dollars (11.4 billion US dollars) on property in 2016/17, down from 31.9 billion Australian dollars (23.9 billion US dollars) the previous year.

Overall Chinese investment in the Australian economy fell from 47.3 billion Australian dollars (35.4 billion US dollars) to 38.8 billion (29.2 billion US dollars). Despite the drop, China remains by a long way the largest source of investment in Australia, dispelling concerns that political tensions between Beijing and Canberra are damaging economic ties.

Australia is not the first country to have placed restrictions on foreign property buyers. 

After prices rocketed in 2016 in Vancouver, Canadian authorities put a 20 percent tax on foreign property purchases, and slapped a one percent levy on property left empty for more than 180 days. 

Sales of property in the city hit a 17-year-low in April, with prices tumbling in certain areas.

New Zealand’s government is currently looking at implementing a blanket ban on selling property to overseas investors, after prices in Auckland rocketed by 85 percent between 2012 and 2016.