They invest because they think it's a good bet that property will rise. If you build enough housing so that housing won't keep rising in price, people will stop investing.
Not always. In a lot of cases they do it because real estate is a safe, illiquid investment that will remain stable and valuable if the despots in their home country ruin the local economy or decide to seize their assets. In those cases, they don't mind if values take a hit.