With a federal election just around the corner, the Albanese Government has rolled out a one-two punch: an interest rate cut and a crackdown on foreign investment in housing. Strategic policymaking or a well-timed bid for voter approval?
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On 16 February 2025, the government announced a two-year ban on foreign investors purchasing established homes, effective 1 April 2025 to 31 March 2027. Alongside this, a clampdown on foreign land banking aims to stop investors from sitting on undeveloped land, with the promise of boosting housing supply and easing affordability pressures.
The official line is that these measures will help more Australians into homes. But with an election looming, the timing of these headline-grabbing policies feels far from coincidental. The real question is: Will they make a difference, or just make waves at the ballot box?
Ban on foreign purchases of established dwellings
From 1 April 2025, foreign investors will be prohibited from acquiring established dwellings in Australia during the period of the ban, except where certain exceptions apply. No specific exceptions have been disclosed yet, but the government has stated investments that significantly boost or support the availability of housing supply may fall outside of the ban.
So how is this different to the existing regime? Under the law, foreign persons are required to obtain FIRB approval to acquire an interest in residential land, regardless of value. However, in accordance with the government’s current foreign investment policy, the government generally prohibits foreign persons from purchasing established dwellings, meaning that applications for acquisitions of such properties are typically denied. That said, under the policy, certain categories of investors may apply for FIRB approval as exceptions to the general rule:
- Temporary resident visa holders seeking to purchase an established dwelling as a principal place of residence while in Australia.
- Foreign investors purchasing an established dwelling for re-development, provided the redevelopment genuinely increases Australia’s housing stock (i.e., at least one additional dwelling is created on the land).
- Foreign companies purchasing an established dwelling to house their Australian-based staff.
Therefore, on closer inspection, the new ban appears to change little to the current policy. The primary impact will fall on temporary residents and foreign companies – particularly if they can no longer rely on the existing exceptions. However, the ban may not have a significant impact on foreign investors purchasing established dwellings for redevelopment, given the government’s commitment to welcoming investments that support housing supply. It is hoped that build-to-rent projects will fall within this category. However, with increased scrutiny, foreign investors may face longer application review periods or be required to provide stronger evidence that their proposed developments will meaningfully contribute to Australia’s housing supply or affordability.
Crackdown on foreign land banking
Under current regulations, foreign investors require prior FIRB approval to purchase both vacant residential and commercial land, regardless of value. To prevent land banking, FIRB typically imposes development conditions on such approvals:
- for vacant residential land, investors are generally required to construct at least one residential dwelling and complete construction within four years from the date of approval.
- for vacant commercial land, investors must develop the land and commence continuous construction of the proposed development within five years of completing the purchase.
The government is boosting funding and resources to strengthen the ATO’s compliance functions, including to implement a new audit program and enhance monitoring capabilities. As a result, foreign investors acquiring or holding vacant commercial land should expect heightened scrutiny to ensure compliance with development conditions.
For more information, please contact Clementyne Rawlyk and Madeleine Kulakauskas.
