The Australian Government announced significant changes to foreign investment rules for residential property, signalling a shift in policy aimed at improving housing affordability and accessibility for local buyers.
Starting 1 April 2025, a 2-year ban on foreign acquisitions of established dwellings will take effect, alongside stricter compliance measures and higher fees for certain transactions. Under the new rules, foreign individuals (including temporary residents) and foreign-owned entities will be prohibited from purchasing established residential properties in Australia for 2 years, from 1 April 2025 to 31 March 2027. This measure represents a significant departure from past policy, which generally allowed foreign investors to acquire established homes under strict conditions, such as redevelopment requirements.
The primary objective behind this moratorium is to alleviate competition in the housing market and prioritise homeownership opportunities for Australians.
Despite the broad restriction on foreign investments, certain exemptions will apply. Transactions that contribute to the housing supply, such as redevelopment projects that result in a net increase in dwellings, will still be permitted. Additionally, properties intended for accommodation under the Pacific Australia Labour Mobility scheme, which supports seasonal workers in key industries, will be exempt. While these carve-outs aim to maintain some level of foreign investment in the property sector, they are narrowly defined to limit speculative acquisitions by foreign investors.
In addition to the temporary ban, the government will implement stricter foreign investment compliance measures and increase associated costs. This includes tripling application fees for foreign investors seeking to purchase established homes under exceptional circumstances, making these transactions significantly more expensive as a way to discourage them. Vacancy fees for foreign-owned properties left vacant for extended periods will also double, aiming to ensure that these properties are occupied and contribute to housing availability.
Furthermore, the government has allocated $5.7 million over four years to the Australian Taxation Office and Treasury to enhance monitoring and enforcement of foreign investment laws, specifically targeting non-compliance and land banking practices. These financial deterrents, combined with the temporary ban, represent a clear effort by the government to redirect foreign capital from established housing to new developments that increase the housing supply.
The Australian Government's latest foreign investment restrictions reflect a broader policy push to rebalance the housing market in favour of domestic buyers. Foreign investors and developers must adapt their strategies, ensuring full compliance with the evolving regulatory framework.
