Thinking about buying an investment property in Australia? Congratulations! You’re one step closer to a profitable investment choice for life.
What’s the hitch you wonder? Well, there are a number of restrictions on foreigners buying property in Australia - but don’t go running for the hills just yet.
Most of these rules are quite straightforward and give you plenty of room to achieve your investment goals. In fact, property investment is much easier for foreigners in Australia than in many other countries!
But how do you even begin to learn the rules and where can you find these restrictions?
In this blog, we explore which property types you can purchase with your visa and the requirements needed to obtain approval from the Foreign Review Investment Board.
We will also walk you through foreign investment restrictions, from a buyers' eligibility criteria to the requirements for purchase approval.
With a little digging into the market’s stability you can make a bullet-proof plan to snag an Australian property, while avoiding investment mistakes on foreign territory.
Can foreign residents buy property in Australia?
In a nutshell, yes. All foreign residents can buy property in Australia as long as they get approval from the Foreign Investment Review Board (FIRB).
The FIRB is a government body that ensures that the country benefits economically from foreign property investments.
The Board’s restrictions on foreigners buying property in Australia are designed to protect the ownership opportunities of Australian citizens, and benefit the employment sector of the country.
Who are classified as foreign investors?
The term ‘foreign investors’ can be broadly categorised as temporary residents and / or non-Australian residents.
You may be considered a temporary resident if you:
- Hold a temporary visa that allows you to remain in the country for a continuous period that exceeds 12 months. This may include a partnership visa, 457 work visa, a temporary skills shortage visa and a student visa.
- Have applied for PR and currently hold a bridging visa that lets you stay in Australia until the application comes through.
You may be considered a non-resident if you’re not an Australian citizen and do not generally live in Australia.
Non-residents may include:
- Temporary visa holders
- Foreign governments, corporations, members of a limited partnership and trustees of a trust who meet the definition of a ‘foreign person’ as stated by the FIRB.
How do you apply for FIRB approval?
Here’s a quick breakdown:
- Read through the FIRB guidance notes to check whether you need to obtain approval.
- If you need to apply for approval, follow the Application Checklist to meet all the necessary requirements.
- Fill out the correct application form depending on the type of investment you’re seeking approval for. You must also list down the address and title details of your potential investment property.
- Sign the declaration
- Submit the form and pay the application fee
- The FIRB will generally make a decision on your application within 30 days and inform you within another 10 days.
Are any investors exempt from obtaining FIRB's approval?
Yes! If you fit into any of the categories below, you can sail right past the FIRB's restrictions:
- Australian citizens (no matter which country they are currently residing in)
- New Zealand citizens
- Australian PR holders
- Foreigners buying property with their spouses as joint tenants, and their spouse fulfils one of the above exceptions.
Can a U.S. citizen own property in Australia without FIRB approval?
Foreign investors residing in the United States (including U.S. citizens), may not be able to acquire an interest in vacant commercial land of any value in Australia without the FIRB's approval.
However, they may be able to purchase or acquire an interest in developed commercial land without needing the FIRB's approval if the property value is below $1,250 million.
This perk is available to foreign investors from certain Australian Free Trade Agreement partner countries including:
- New Zealand
- South Korea
Can foreign residents buy residential property in Australia?
There are 3 main types of residential property you can purchase in Australia as a foreign resident:
1. New buildings
These are properties that have not been previously sold as a dwelling and have not been previously occupied. In special instances, previously occupied property may still classify as a ‘new building’ if the property:
- Was part of a development with 50 or more dwellings
- Was sold by the developer of that development
- Wasn’t occupied for more than 12 months
2. Vacant land
Vacant land is classified as any bare piece of land that holds no houses, buildings or other residential or commercial features on it. This type of property purchase can only be made if you intend on building a house on the land, so make sure that it meets your construction requirements and goals.
3. Established dwellings
This is a property that is located on residential land and is not classified as a ‘new dwelling’.
Commercial residential premises such as caravan parks and motels do not fall into this category. Different rules govern aged care facilities such as retirement villages and a few student accommodations.
Foreign residential property investment rules and restrictions
The restrictions on foreigners buying residential property in Australia largely depend on:
- The property type
- Whether the buyer is a temporary resident or a non-Australian resident
In either case, foreign buyers would find a less complicated process and fewer rules when investing in new buildings and vacant land. Investing in an established dwelling would have you face a lot more red tape.
1. New buildings
Foreigners may buy any number of new dwellings, as long as they obtain the FIRB’s approval for each one.
2. Vacant land
Foreigners may purchase vacant land for the development of a residential dwelling, as long as the demolition and redevelopment is completed within 4 years of obtaining approval from the FIRB.
After the construction has been completed, proof must be sent to the FIRB within 30 days.
3. Established dwellings:
The rules on established property investments in Australia have been made more restrictive for foreigners.
According to the FIRB, temporary residents cannot purchase established dwellings as investment properties. Those with temporary visas can only purchase one established dwelling to live in, but only if they:
- Use it as their principal place of residence
- Do not give any part of the property on rent. They must ensure that the property is vacant at settlement
- Sell the property within 3 months of it being no longer used as their principal place of residence. This usually occurs when the temporary resident has to leave the country. But if they stay on and become an Australian citizen or obtain a permanent visa, they may no longer need to sell the property.
Temporary residents may also purchase an established dwelling for redevelopment if:
- Improving the property may genuinely increase the market’s housing stock
- The project is completed within 4 years of the date of approval
- It hasn’t been rented out before it was demolished and redeveloped
Australian non-residents cannot buy established dwellings for residential purposes. They are however able to purchase an established dwelling for redevelopment under the same rules as temporary residents.
Can I buy commercial property in Australia as a foreigner?
Under the rules of the FIRB, foreign buyers can invest in:
Vacant commercial land:
A piece of land with no permanent structure that can be legally occupied by people, goods or livestock.
Developed commercial land:
A piece of land with a permanent structure that can be legally occupied by people, goods or houses. This property should not otherwise be considered exclusively residential or agricultural land.
Buyers looking at investing in this sector may have to choose between two types of developed commercial land: sensitive and non-sensitive.
Sensitive developed land is a piece of land that can hold crucial infrastructure or may otherwise be considered sensitive due to the nature of operations that are taking place on its premises.
Non-sensitive developed land are those that do not hold crucial infrastructure on its premises and are generally utilised for commercial or residential purposes.
Foreign commercial property investment rules
Although the restrictions on foreigners buying commercial property in Australia may seem a bit more complicated, investing in this sector has shown historically to hold a good pay out.
All foreign investments would need to be approved by the FIRB, if the value of the investment is above a certain monetary threshold. The threshold generally depends on:
- Whether the property is vacant or developed land
- Whether it meets the requirements to be sensitive land
- The investor's nationality
- Whether or not the buyer is a foreign government investor
Foreign government investors
$0 for all types of commercial land
Private investors from free trade agreement partner countries (except Hong Kong)
$0 for vacant commercial land
$1,250 million for developed commercial land
Private investors from Hong Kong
$0 for vacant commercial land
$63 million for sensitive developed commercial land
$1,250 million for non-sensitive developed commercial land
All other private investors
$0 for vacant commercial land
$63 million for sensitive developed commercial land
$289 million for non-sensitive developed commercial land
All investments in national security land
$0 irrespective of the nature of the investor
To obtain the FIRB’s approval on a purchase, each type of commercial property has its own set of investment requirements which should be met.
If you’re a foreign resident who’s thinking of buying commercial property in Australia, it may be best if you consider how these requirements may impact your investment plan before signing on the dotted line.
Vacant commercial land
The FIRB may generally approve a purchase of vacant commercial land if the land is put to productive use within a reasonable timeframe.
The approval may be under the conditions that:
- The land should be developed
- The continuous construction of the intended development should begin within 5 years of completing the land purchase
- The land should not be sold, transferred or disposed of before the development is completed
Sensitive developed commercial land
Under the FIRB's rules, the purchase of sensitive developed land will only be considered as acquiring an interest in developed commercial land if the land is:
- Leased to a state, territory or certain Commonwealth entities. The full list can be found here.
- Fitted out exclusively for the supply of goods, equipment or technology to the military or defense force, operating nuclear facilities or storing bulk data.
- Fitted out to store or deal with certain biological agents.
- Hosts a mine, oil or a similar structure
- Hosts a stored communication
- Hosts servers that are crucial to an Authorized Deposit-taking institution or a stock exchange in Australia
- Hosts public infrastructure which may include airport or ports, transport facilities and systems that provide various services such as supplying electricity, gas or water.
An exemption certificate waiving the need for FIRB's approval on vacant commercial land may only be granted if Australian investors also have an equal opportunity to purchase that land through an open and transparent sale process.
Foreign buyers must maintain records of certain actions taken regarding their property investment for up to 5 years.
What happens if foreigners breach the purchase rules?
Not following the rules could have you facing serious penalties.
According to Canstar, if a foreigner purchases a property without the FIRB's approval, the criminal penalty may be fines of up to $3.3 million or even 10 years of imprisonment.
The civil penalty for breach of investment rules may require that either the capital gain be paid, or 25% of the market value of the residential land, whichever is greater.
Things to keep in mind when buying an Australian property as a foreign investor
Apart from the general restrictions on foreigners buying property in Australia, here’s a few more things you might want to factor in:
1. Additional costs of buying a property as a foreign investor
Foreign buyers may need to pay quite a hefty application fee to submit their purchase for FIRB approval.
The minimum FIRB application cost for a single action may be $2,000 for properties worth under $75,000.
If your property is worth between $4 million and $4,999,999, the maximum FIRB application cost may be $50,800.
Foreign buyers may have to pay the Foreign Citizen Stamp Duty, apart from their usual stamp duty when purchasing Australian property.
The Foreign Citizen Stamp Duty payable differs from state to state, with the lowest being 3% of the property’s purchase value, and the highest being 8.75%.
Buyers of property in the Northern Territory can rest easy - no Foreign Citizen Stamp Duty is needed here!
2. Home loan restrictions on foreigners
Australian lenders may be more wary about loaning to foreign investors and impose tighter lending criteria. Foreigners may be required to:
- Make a large deposit to qualify for a home loan. An even larger deposit may be required if a mortgage is needed.
- Pay higher interest
- Earn an exclusively local income.
3. Reliability of the Australian market
You’re probably wondering whether it’s worth all the hassle to invest in Australia’s property market. What exactly is it that makes more and more overseas buyers invest in the Australian property market?
- A global survey found that Australia was ranked by foreign investors as the 5th best country in the world for stable and secure property investments.
- Around 70% of Australian households are owner-occupied, which means there’s less speculation about foreign investment and debt-fueled price bubbles.
- Australia has a housing shortage in some of its major cities. This has led to high demand for homes and rental properties across the country.
- COVID-19 changed the Australian foreign property investment market. With a strong Government support system in place, Australia successfully flattened the curve during the pandemic and continued to maintain a stable economy.
- The lockdowns and subsequent hurdles had little impact on the property market’s growth. While overseas property markets such as in Hong Kong and the U.S. took substantial hits, Australian property prices rose in value.
- The country has enjoyed consistent capital growth for the last century, with property prices doubling every 7 to 10 years!
It’s a no-brainer - Australia is a great country for property investment, even with all the regulations.
Not only is this a great way to live and work in a thriving economy, but investors could make twice the profit 10 years down the line!
Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.
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