Australia's Housing Market Shake-Up: The 2-Year Ban on Foreign Purchases

The Australian housing market is a hot topic, and the government has just turned up the heat with a significant policy change. A temporary, 2-year ban on foreign purchases of established dwellings is set to take effect from April 1, 2025, to March 31, 2027. As a Foreign Investment Review Board (FIRB) specialist, I'm here to break down what this means.

Why the Change?

The driving force behind this ban is clear: housing affordability. The government aims to prioritize Australian citizens and permanent residents, ensuring they have greater access to existing housing stock. This move also targets "land banking" practices, where foreign investors hold land without developing it, contributing to supply shortages.

What Does the Ban Entail?

• The Core Restriction:
  • Foreign investors, including temporary residents and foreign-owned companies, will be prohibited from purchasing established residential properties.
  • This is a temporary measure, with a review scheduled before March 31, 2027, to determine its future.
• Key Exceptions:
  • Investments that significantly increase housing supply will likely be exempt.
  • Purchases related to the Pacific Australia Labour Mobility (PALM) scheme will also be exempt.
  • Existing exemptions continue for:
    • Permanent residents of Australia.
    • New Zealand citizens.
    • Spouses of Australian citizens, permanent residents, or New Zealand citizens (when purchasing as joint tenants).
• Increased Scrutiny:
  • The Australian Taxation Office (ATO) will receive increased funding to enhance screening and audits of foreign investment proposals.
  • There will be a much stronger look at foreign investors who have already obtained FIRB approvals for land acquisitions, to insure they are following the conditions of those approvals.

What This Means for Foreign Investors

If you're a foreign investor, it's crucial to understand these changes. If you currently hold a FIRB approval that was obtained before the 1st of April 2025, it is most likely that you will be able to continue with your purchase. However, moving forward, established dwellings will largely be off-limits.

Key Takeaways

• The government is serious about tackling housing affordability.
• Increased ATO oversight means stricter enforcement.
• Exceptions exist for investments that boost housing supply.

This policy shift reflects the government's commitment to ensuring Australians have access to adequate housing. As always, FIRB regulations can be complex, and it's advisable to seek professional advice for specific situations