The Australian Government has announced significant reforms aimed at addressing housing affordability and availability. The Australian Government will implement a temporary ban on foreign investors purchasing established residential properties and strengthen measures to prevent land banking by foreign entities. These changes aim to increase housing availability for Australian residents while ensuring that land is developed efficiently.
Key Changes and Implications
Definition of Foreign Investment and Established Homes
Under Australian law, a foreign investor refers to individuals or entities that are not Australian citizens or permanent visa holders. This includes temporary visa holders, foreign-owned companies, and overseas-based investors. Australian citizens, even if residing overseas, are not considered foreign investors for the purposes of these regulations.
For example:
- A Chinese national on a temporary work visa in Australia would be considered a foreign investor.
- A Singapore-based company looking to purchase residential property in Australia would also be classified as a foreign investor.
- An Australian citizen living in the United States would not be considered a foreign investor.
An established home refers to a pre-existing residential property—a home that has already been built and lived in. This differs from newly constructed dwellings or properties purchased off-the-plan, which remain permissible for foreign investment under existing regulations.
For example:
- A two-bedroom apartment in Sydney that has had previous owners is an established home.
- A newly built house in Melbourne that has never been lived in would not be classified as an established home.
- A property purchased off-the-plan that is still under construction does not fall under the established home category.
Ban on Foreign Purchases of Established Homes
Effective from 1 April 2025 until 31 March 2027, foreign investors, including temporary residents and foreign-owned companies, will be prohibited from purchasing established residential properties in Australia. This measure ensures that more properties remain available for Australian buyers.
Limited exemptions apply, including cases where the investment significantly contributes to housing supply or supports housing availability. Those affected should review their investment plans accordingly.
If you are currently in the process of purchasing an established home, it is strongly recommended to complete settlement before 1 April 2025, as this may be the last opportunity to acquire such properties under current regulations.
Stronger Regulations on Land Banking
Foreign investors who acquire vacant land in Australia are required to develop the land within a reasonable timeframe. Authorities will increase scrutiny of investors holding vacant land without development to ensure compliance with development conditions. This policy aims to prevent speculative landholding that drives up property prices and delays much-needed housing projects.
For example:
- A foreign investor who purchases a large block of land but leaves it undeveloped for years in hopes of selling it at a higher price may face penalties.
- A developer who buys vacant land and begins construction within a set timeframe would be in compliance with regulations.
What This Means for Foreign Investors
Foreign investors looking to purchase property in Australia must adapt their strategies. The new regulations mean:
- Foreign buyers can no longer purchase established homes unless an exemption applies.
- Investors holding vacant land should ensure they meet development requirements to avoid penalties.
- Those seeking to invest in Australian real estate should explore opportunities that align with government regulations, such as new housing projects that contribute to supply.
What You Should Do Next
Foreign investors and developers should review their property portfolios and investment strategies in light of these changes. It is essential to ensure compliance with the new rules to avoid potential penalties or forced divestment.
For those looking to invest in Australian real estate, focusing on new developments or projects that align with government priorities is advisable. If you are currently in the process of purchasing an established property, we encourage you to finalise settlement before 1 April 2025 to avoid being impacted by the ban.
