Foreign investment in established residential properties banned for 2 years: what foreign purchasers need to know!

Effective from 1 April 2025 to 31 March 2027, the Australian Government has introduced significant restrictions on foreign investment in established residential properties. These changes aim to address housing affordability challenges and prioritize housing availability for Australian residents.

Here’s what you need to know:

Who will be affected?

• Foreign persons will be banned from the purchase of established dwellings in Australia. This will not include the purchase of vacant residential land or new residential dwellings subject to construction, however any foreign investor should be considering what it is they are proposed to purchase and whether it is caught up in the new scheme.
• Foreign persons for the purpose of this ban will include temporary residents (such as international students and short-term works) and foreign owned companies and not just foreign individuals.
• Exceptions: There are however exceptions (similar to the existing exemptions which apply to foreign investment) for permanent residents, New Zealand citizens as well as spouses of Australian citizens, permanent residents or New Zealand citizens when purchasing jointly with their spouses. Foreign persons who are seeking to purchase an established dwelling for redevelopment may also be exempt from these changes, however will need to seek approval and substantiate the redevelopment will generate at least an additional 20 dwellings.

Existing applications prior to 1 April 2025

If you are a foreign person who made an application prior to 1 April 2025, however your acquisition has not yet taken place, transitional arrangements are in place and your application will be considered under the existing guidelines for acquisitions of residential land.

Potential extension

Whilst not currently implemented, the Australian Government has announced they will review the operation of this ban and the effect that it has on housing availability and enforceability and will make an assessment as to whether this ban should operate past 31 March 2027. Therefore, foreign persons should not presume that after this date they will be able to acquire established property as they once were.

Compliance and Enforcement

The Australian Taxation Office (ATO) will intensify enforcement through enhanced screening of foreign investment proposals related to residential properties. A comprehensive audit of current foreign investment approvals for vacant residential land development is currently being conducted to ensure compliance with development conditions

Other measures aimed at increasing availability

Whilst not newly introduced, these measures align with some other recent measures introduced by the Australian Government aimed at limiting foreign investment to tackle the current housing crisis. This includes:

1. Starting from 1 July 2024, application fees for foreign investment in established dwellings substantially increased. For example, the fee for properties valued at $1 million or less has risen to $44,100. These fees are designed to deter speculative investments and ensure that foreign investments contribute positively to the housing market.

2. Currently, foreign investors who own Australian land which is undeveloped or vacant are liable to pay vacancy fees. These fees targets "land-banking," where investors hold undeveloped land without progressing development, thereby limiting housing supply

For vacancy years commencing from 9 April 2024, the vacancy fee has been doubled compared to previous rates.

What does this mean for you?

If you’re a foreign investor thinking about purchasing an established home in Australia, these changes mean that you’ll need to look for other options. You can still buy new homes or land that is ready for development. But if you’re someone with a temporary visa, buying an established home is off the table entirely.

For Australians and permanent residents, these changes won’t impact your ability to buy a home, and they may even help make housing more affordable over time.

If you’re considering investing in property in Australia, it’s important to stay up-to-date with these changes. If you’re unsure about how the new rules will affect your plans, it’s a good idea to speak with one of our Property Law experts at Marsdens on (02) 4626 5077 to get advice tailored to your situation.

The contents of this publication are for reference purposes only. This publication does not constitute legal advice and should not be relied upon as legal advice. Specific legal advice should always be sought separately before taking any action based on this publication.