FIRB Restrictions on the Purchase of Existing Residential Property
Under Australia’s Foreign Investment Review Board (FIRB) regulations, foreign individuals are generally not permitted to purchase existing (second-hand) residential property, unless it is for owner-occupier purposes and approved by the government.
As of June 2024, the Australian government has further tightened its policies, introducing a threefold increase in FIRB application fees for foreign buyers of second-hand residential properties, with the goal of stabilising the housing market and discouraging non-resident demand.
A Little-Known Pathway: Development Purposes
One lesser-known exception is that foreign nationals may apply to purchase an existing residential property for development purposes. However, this category comes with strict conditions and is intended only for projects that increase Australia’s housing supply.
To qualify under this FIRB pathway, the following additional requirements must be met:
1. The Property Must Be Vacant at Settlement
The property must be unoccupied at the time of settlement. Properties with tenants in place are generally not eligible.
2. The Development Must Increase Housing Supply
There must be a net increase in housing stock. For example, demolishing a single dwelling and replacing it with multiple townhouses or apartments.
3. Construction Must Be Completed Within Four Years
The development must be finished within four years of FIRB approval, otherwise it may be considered a breach of FIRB conditions.
4. Evidence of Completion Must Be Provided
Upon completion, the developer must submit formal evidence of construction completion and compliance documentation to the FIRB.
5. No On-Selling Before Completion
The property cannot be sold or transferred to a third party before construction is complete, to prevent speculative flipping.
Demolition vs Retention: FIRB Treats Each Differently
FIRB applies different assessment criteria depending on whether the developer plans to retain or demolish existing structures. Projects that retain heritage or structural elements may face additional scrutiny and require more detailed feasibility reports and design documentation.
Recently, we assisted a foreign developer in Queensland with an FIRB application for a townhouse development involving the demolition of an existing tenanted dwelling. Negotiating the contract for purchase required special care, particularly regarding settlement timing and tenant vacation, to ensure FIRB compliance at the time of settlement.
ENSURE LEGAL – Strategic Legal Support for Foreign Developers
Given Australia’s evolving foreign investment rules, purchasing an existing property for development requires careful planning and precise legal structuring. Failure to meet FIRB conditions or missteps in contract negotiations can result in rejected applications, delays, or legal liabilities.
At ENSURE LEGAL, we specialise in assisting foreign developers with all aspects of FIRB approval and property development in Queensland. Our services include conditional contract drafting, tenancy termination strategies, FIRB compliance advice, and direct liaison with government bodies.
If you’re planning a development project as a foreign investor, contact ENSURE LEGAL today—we provide the legal clarity and protection you need to succeed in Australia’s property market.
