)
Foreign investors will be banned from buying established homes and land banking for at least two years in a move that the federal government says is aimed at easing supply pressures on the housing market.
The ban will take effect from 1 April 2025 and will stay in place until 31 March 2027, after which the government says it will review the merits of the initiative before deciding whether it should be extended further.
The move comes on the heels of the latest data showing a shortfall in the federal government’s target for the construction industry to build 1.2 million new homes Australia-wide over five years from mid-2024.
It also aligns with Federal Opposition Leader Peter Dutton’s budget reply speech in May last year that the Coalition would ban foreign investors and temporary residents from buying established homes for two years.
Under the existing rules, foreign buyers already need permission from the Foreign Investment Review Board to buy a house or land.
However, the changes will ban all temporary residents and foreign-owned companies from purchasing an established dwelling in Australia, unless an exception applies.
Among the exceptions are investments that “significantly increase housing supply or support the availability of housing supply, and for the Pacific Australia Labour Mobility scheme”. This scheme allows Australian businesses to hire workers from the Pacific islands and Timor-Leste to meet unskilled and semi-skilled positions nationally.
The rationale for the ban is to make more homes available to domestic buyers, although sales to foreign buyers account for just 1 per cent of total property sales in Australia, with the number of foreign buyers falling sharply in recent years.
“We’re coming at this housing challenge from every responsible angle,” say Treasurer Jim Chalmers and Federal Housing Minister Clare O’Neil in a joint statement.
“This is all about easing pressure on our housing market at the same time as we build more homes.
“These initiatives are a small but important part of our already big and broad housing agenda which is focused on boosting supply and helping more people into homes.
“Until now, foreign investors have generally been barred from buying existing property except in limited circumstances, such as when they come to live here for work or study.”
To ensure compliance with the new regulations, the government is boosting the Australian Taxation Office’s (ATO) foreign investment compliance team with an additional $5.7 million in funding over the next four years.
The ATO and Treasury also have secured an extra $8.9 million in funding over the next four years to target land banking by foreign investors, with an additional $1.9 million ongoing from FY30 to implement an audit program and enhance compliance of these activities.
“We’re cracking down on land banking by foreign investors to free up land to build more homes more quickly,” says the joint statement.
“Foreign investors are subject to development conditions when they acquire vacant land in Australia to ensure that it is put to productive use within reasonable timeframes.
“The government is focused on making sure these rules are complied with and identifying any investors who are acquiring vacant land, not developing it while prices rise and then selling it for a profit.
“This activity breaks the rules and results in delays to the development of essential residential housing and commercial developments.”
The government says that foreign investors that have already acquired or are planning to acquire vacant residential or non-residential land will be subject to “heightened scrutiny by the ATO and Treasury to ensure they comply with development conditions”.
“A temporary ban on foreign purchases of established dwellings, strengthened compliance activity by the ATO to enforce the ban, and an enhanced compliance approach by both the ATO and Treasury to discourage land banking by foreign investors will help ensure that foreign investment in housing is in our national interest,” says the joint statement.
)
