As housing in Australia becomes less affordable and available, the Australian government has stepped in to stop foreign investors buying established homes until 31 March 2027. This is a temporary ban and applies to purchases from 1 April 2025. The change could lead to about 1,800 properties being freed up annually for local house buyers.
Who this affects
Although foreign investors were previously able to buy existing property in some cases, such as when they came here to live for work or study, the ban now extends to all foreign investors including temporary residents, foreign-owned companies and overseas-based investors.
Exceptions, however, apply to those investments that significantly increase or support the availability of housing supply, and those for the Pacific Australia Labour Mobility scheme.
Australians who live overseas are not considered foreign investors.
The affected property – “established homes” – excludes newly built and off-the-plan properties.
Land banking in regulator’s sights
The new policy also extends to targeting “land banking”, when foreign investors buy vacant land and hang onto it in the hope of a future profit, without developing it. The effect of land banking can mean the delay of building projects.
For foreign investors who purchase land subject to strict requirements to provide housing and fail to deliver, the government will be intensifying ATO and Treasury monitoring to ensure development conditions are met.
The Government is determined to clear these roadblocks to housing supply by boosting funding for ATO and Treasury auditing and compliance teams by more than $10 million over future years.
Steps to take
These new policy changes are significant and any breaches by foreign investors could lead to major penalties.
If you are a foreign investor it’s important to be aware that the new ban kicks in on 1 April 2025, so if you are considering, or in the process of, purchasing an existing home, settlement will need to be completed before the start date to ensure your purchase is compliant.
The pressure is also now on those who have invested in vacant land for the purpose of housing development. Time is of the essence, as is compliance with the conditions placed on the purchase to build on that land.
If you are considering investing in Australian property then the focus of your planning strategies will need to be on purchasing real estate that meets the new requirements, such as newly built or off-the-plan housing, or showing that your investment boosts housing availability. If you own or plan to acquire vacant land, then the imperative will be to meet development requirements to satisfy the government’s housing supply goal.
Now is the time for a shake-up of your property portfolio. Look out for further guidance to be supplied by the ATO and Treasury closer to the date the ban commences to fine tune these policy changes.
