In a decisive move to address housing affordability and availability, the Australian government has announced a two-year ban on foreign investors purchasing established homes. This policy, effective from April 1, 2025, to March 31, 2027, aims to alleviate pressure on the housing market and prioritise local buyers.
Overview:
- Policy Overview
- Implications for Purchasers
- Implications for Real Estate Agents
- Addressing Land Banking
- Conclusion
Policy Overview
Historically, foreign investors faced restrictions when buying existing properties, with exceptions for those relocating to Australia for work or study. The new policy eliminates these exceptions, prohibiting all foreign investors—including temporary residents and foreign-owned companies—from purchasing established dwellings during the ban period. Limited exemptions exist for investments that significantly boost housing supply or support housing availability, such as those related to the Pacific Australia Labour Mobility (PALM) scheme.
The government has allocated $5.7 million over four years to enhance the Australian Taxation Office’s (ATO) foreign investment compliance team. This funding will assist in the enforcement of the ban and improve the screening of foreign investment proposals related to residential properties. ​
Implications for Purchasers
For foreign investors and temporary residents, this ban significantly alters investment strategies. The prohibition extends to international students and short-term migrant workers, who previously could purchase established homes under certain conditions. These groups must now turn to new dwellings or consider rental options, potentially increasing demand in the rental market. ​
Local buyers may benefit from reduced competition, potentially easing property prices and improving accessibility to homeownership. The government estimates that the ban could free up approximately 1,800 properties annually for local buyers, contributing to broader housing affordability initiatives.
Implications for Real Estate Agents
With foreign investors barred from purchasing established homes, agents may experience a decrease in demand from this segment. However, this could be offset by an uptick in interest from local buyers and a potential surge in the market for new dwellings. Agents should familiarise themselves with the nuances of the ban to provide accurate guidance to clients and explore opportunities in promoting new property developments.​
Typically, foreign investors are required to obtain approval from the Foreign Investment Review Board (FIRB) before entering into a binding contract to purchase residential property in Australia. This approval must be secured prior to signing any contract or making a purchase.
Given this requirement, the critical date for compliance with the ban is the application date for FIRB approval, which must be before entering into a binding contract. Therefore, foreign investors who have secured FIRB approval and entered into a binding contract before April 1, 2025, are not affected by the ban, even if the settlement occurs after this date. Conversely, any applications submitted on or after April 1, 2025, will be subject to the ban, regardless of the contract or settlement dates.​
In summary, the ban is linked to the date of the FIRB application and the subsequent contract date, not the settlement date. Foreign investors must obtain FIRB approval before entering into a binding contract, and applications submitted from April 1, 2025, onwards will be prohibited from purchasing established dwellings during the ban period.
Addressing Land Banking
In addition to the purchase ban, the government is cracking down on land banking by foreign investors—where valuable land is held without timely development. An audit and compliance program will be implemented, with $8.9 million allocated over four years to the ATO and Treasury to enforce development conditions on vacant residential land. This initiative aims to expedite the availability of land for housing construction, further enhancing supply. ​
Conclusion
The two-year ban on foreign purchases of established homes represents a significant policy shift aimed at improving housing affordability and availability for Australians. While it presents challenges for foreign investors and necessitates adjustments within the real estate industry, the overarching goal is to create a more accessible housing market for local residents. Stakeholders must stay informed and adapt to these changes to navigate the evolving landscape effectively.
