Foreign investment in Australia is rapidly growing. The Australian government, through its foreign investment policy, wants to ensure that all the allowed foreign investment is to benefit the Australian community. Can foreigners buy property in Australia? Well, foreigners can acquire property in Australia, but only after the approval of the Foreign Investment Review Board (FIRB).
The Australian government has charged the FIRB with the mandate of reviewing, approving, and controlling all foreign property investment in Australia. After the FIRB’s examinations of the application by people classified as foreign non-residents (FNR), it makes the necessary recommendations to the Australian government under the government’s foreign investment policy.
Properties Foreigners Can Purchase
The residential real estate aims at facilitating the increase of housing supply through foreign investment. It does not intend to raise the prices of the houses due to over-demand for established house stock. When the demand for built house stock rises, the prices follow suit for the Australian residents. This increase in prices locks out some of the residents out of the housing market. The government, through its foreign investment policy under the FIRB, defines well which properties foreign investors can acquire.
Foreign individuals and corporates will normally get approval from the FIRB for the following types of property.
1. Vacant Land
Foreigners in Australia are allowed to purchase and own land where construction has not commenced. The government allows foreigners to use the vacant land they own for development. It also includes land packages and houses that are yet to be developed.
However, this ownership is subject to a FATA imposed condition. The condition is that owners should complete their constructions no more than four years after the FIRB approves their application for residential developments, or they commence a continuous construction within five years for commercial developments.
2. New Dwellings
A foreigner buying property in Australia can get his or her application approved by the FIRB for new dwellings. These new dwellings are inclusive of home units, house, land packages, and townhouses that are under construction or they are new constructions with no prior occupancy or previously sold. Such new dwellings are sold ‘off-the-plan’.
The governments only allow ‘off-the-plan’ sales to foreign investors for extensively refurbished commercial structures or new developments, which have been converted to residential. Once the land is developed, the owner can rent it out, sell it, or even use it. This applies to the condition that foreigners purchase no more than 50% of the dwellings in development.
3. Second-Hand Dwellings
This only applies to a particular category of foreign nationals holding a visa, which permits them to reside in Australia continuously for no less than 12 months. The FIRB can approve their application to purchase established real estate if they intend to use the home as their principal place of residence during their stay in Australia.
The property may whatsoever not be used for rental purposes. For such approval, the condition behind it is for the property to be sold if it halts to be their principal place of residences, at the expiration of their temporary resident visa, or they leave Australia.
4. Senior Executives Resident
This approval is for foreign companies with a well-established business in Australia to buy and use such residents for more than 12 months. The FIRB may issue an approval on the condition the company sells the property when no longer required for the purpose. Eligibility and the number of properties a company can acquire depend on the company’s operations in Australia.
5. Commercial Real Estate
Any foreign company or individual willing to purchase existing commercial and non-residential property worth $5 million or more, must seek the approval of the FIRB. FIRB usually approves such applications unless it considers them not to align with national interests. The same also applies if the property is at the development stage or a major refurbishment stage. Additionally, construction of such property must start within a specified period.
Any proposal by a foreigner to buy a developed residential real estate, which does not fall into the above categories, is subject to FATA, but the approval rate is relatively small.
Applications to the FIRB
All contracts by foreigners to acquire an interest in the urban land in Australia should be made conditional upon the approval of the FIRB. This condition is unless the approval was obtained before entering into the contract. For such a decision, contracts should allow at least 40 days from the lodgement date. If a foreign investor enters into an unconditional agreement to acquire any property before the request is approved, they are in breach of the FATA and are subject to significant penalties.
If the FIRB receives no prior notification and the foreigner nevertheless buys the property, fines of up to $A 50,000 on individuals and $A 250,000 on companies can be imposed. Rules for foreigners buying property in Australia need to be followed and applied at every stage of acquiring property by an individual foreigner or a corporate foreigner to avoid hefty penalties.
With the Australian real estate market opening up to foreigners, more and more capable foreigners are seizing the opportunity to make solid investments in Australia. Notably, the current status of Australian business visas has gone up. Foreigners interested in travelling to Australia should consider professional help in the application and processing of their visas.
With the Australian property market witnessing significant growth and the population is growing at a rate much faster than dwellings are being constructed because of a high level of immigration and strong employment demand. it is good for real estate investors to be cautious when making their investments. Those buying a property from agents and developers need to research well on the company. Besides, they should ensure the property offers long-term satisfaction to avoid returning to the market due to dissatisfaction.