Despite recent bans on foreign investment, exceptions for build-to-rent (BTR) developments send a strong signal to foreign investors and could even boost Australia’s housing supply.
Australia’s housing affordability and availability crisis has dominated political discourse, particularly in the lead-up to the recent Federal election. With rising property prices and limited rental options, housing emerged as a central issue for voters, prompting the government to introduce a suite of reforms aimed at increasing supply and improving affordability.
One such reform is the announcement of a two-year ban on foreign investors purchasing established residential dwellings, effective from 1 April 2025 to 31 March 2027. The measure is designed to reduce competition from foreign buyers in the established housing market and prioritise access for Australians.
However, the ban is not absolute. Subject to foreign investment approval, several key exceptions apply, including where:
- a foreign person seeks to purchase an established dwelling for redevelopment that will significantly boost housing stock (i.e. by creating at least 20 additional dwellings)
- the acquisition supports housing availability on a commercial scale, such as within multi-unit developments like retirement villages, aged care facilities, or student accommodation
- a foreign person seeks to purchase qualifying Build to Rent (BTR) developments.
These exceptions reflect the government’s current foreign investment policy focus, openly stated as attracting capital to sectors that increase Australia’s housing supply, particularly through new housing stock aligned with its national housing agenda.
Below, we take a closer look at the BTR exception, including eligibility criteria, reduced FIRB fees, and what this means for foreign investors.
Eligible BTR developments
To benefit from the exception to the residential land ban and access reduced foreign investment application fees (discussed below), a BTR development must meet specific eligibility criteria designed to ensure it delivers long-term rental housing and aligns with national housing objectives.
In summary, to qualify as an eligible BTR development:
- The development must contain (or will contain) at least 50 dwellings;
- Each dwelling must be available for rent to the general public, excluding student accommodation, land lease communities, and retirement villages;
- Dwellings must be offered on lease terms of at least five years, although tenants may request shorter terms;
- All dwellings must be owned by a single entity at all times; and
- At least 10% of the dwellings must be, or will be, affordable dwellings, as defined in the Income Tax Assessment Act 1997.
These requirements ensure that BTR developments are stable, institutionally managed, and contribute meaningfully to Australia’s long-term rental supply.
Additional use and hold-period conditions also apply:
- For land acquired to develop a BTR project, the BTR use must continue for the earlier of the investor’s ownership period or 15 years from the issue of an occupancy certificate.
- For investments in existing BTR developments, the project must continue as a BTR development for as long as the investor holds an interest in it.
Reduced FIRB fees for BTR investments
A key change supporting the BTR pathway is the reduction in FIRB application fees for land acquisitions intended for BTR developments. Traditionally, residential land attracts significantly higher application fees than commercial land, which has created a substantial cost barrier for foreign investors seeking to pursue BTR investments in Australia.
In late 2023, the Treasurer announced that FIRB applications for BTR developments would be subject to commercial land fee tiers, rather than residential tiers. This position was clarified in FIRB’s updated guidance released earlier this year. Under this concessional treatment, the application fee is generally reduced to what fee would apply if the land were commercial, rather than residential.
While each application is assessed on its individual merits, the updated guidance provides illustrative examples. For instance, a A$10 million acquisition of residential land for a BTR development would ordinarily incur a fee of A$796,500, but will now attract a commercial land fee of only A$14,700.
This reform eliminates a significant cost hurdle and is expected to enhance the commercial viability of BTR projects for foreign investors. Importantly, applicants must expressly request the concessional fee treatment in their FIRB application for it to be considered.
What’s next for foreign investors?
The BTR sector continues to gain momentum in Australia, attracting strong interest from institutional investors both domestically and abroad. By exempting qualifying BTR developments from the general ban on foreign investment in residential land and aligning application fees with commercial land thresholds, the government has established a targeted and strategic pathway for foreign capital to engage with Australia’s housing market.
For foreign investors, these changes create a clearer, more commercially viable framework for participation in a stable and policy-supported asset class, and send a strong signal that well-structured foreign investment remains welcome in areas aligned with national priorities.
If you’re considering build-to-rent developments as part of your investment strategy, the team at Hamilton Locke can assist you in navigating the legal and regulatory landscape. For more information, please contact Clementyne Rawlyk, Sarah Roettgers and Madeleine Kulakauskas.
