Foreign buyers will account for 18.1 per cent of residential sales in NSW in the three months to March 2018, down from 23.6 per cent in the same period a year ago, the latest ANZ and Property Council quarterly research found.

In Melbourne, foreign buyers are expected to cover 21 per cent of residential property purchases in the first quarter of 2018, compared with 25.2 per cent a year ago, according to the report. Queensland, meanwhile, saw a sharp fall to 13.8 per cent from 20.4 per cent in the same period last year.

Chinese buyers accounted for as much 87 per cent of foreign property investment in NSW between January and June 2017, according to Credit Suisse research, dwarfing activity from buyers originating from any other country.

"The share of property being sold to foreign buyers does look like it has dropped off, especially in the last couple of months," ANZ senior economist Daniel Gradwell said.

"You can probably attribute that to the stamp duty surcharges across places like NSW and Victoria and additional tightening to regulation and the availability of funding."

Recent policy changes in NSW now see foreign investors charged 8 per cent of the purchase price in stamp duty, double the previous level, among other changes, while Victoria has introduced a vacancy tax on empty properties.

Chinese policy-makers have also continued to tighten the rules on offshore investing, further dampening demand.

"It's taken a while for the tighter capital controls in China to flow through but I think we're starting to see the impact of that now and, combined with the domestic policies, it is starting to squeeze some of that demand out of the market," Mr Gradwell said.

But experts say the drop in foreign purchases is coming off such a high base that there's no immediate danger of a substantial shift in market dynamics.

"[Foreign buyers] are still sitting at around 20 per cent of new homes, so still a pretty significant player in the market," Mr Gradwell added.

"It's not like they're falling off a cliff - there's definitely still demand out there from foreign buyers and, equally, still demand to lend to them from within Australia."

Weakening demand from Chinese investors is indeed slipping from all-time highs, according to international Chinese property platform Juwai, but the decline is to be expected.

"It seems that many observers think it's either historic highs or historic lows, but in fact we believe it's going to be somewhere in between," senior spokesman Dave Platter told Domain.

"We've seen strong inquiries throughout the year ??? lower than 2016, but that's to be expected because that was the highest year ever recorded - particularly the second half of the year."

Other states also saw falling foreign demand in the residential space, but less severe in most cases than NSW, Victoria and Queensland.

Foreign buyers accounted for 11.6 per cent of new homes in South Australia, down from 15.6 per cent in the March quarter of 2017, while Western Australia posted 9.1 per cent of purchases as being from foreign buyers, down from 11.4 per cent in the same period last year.