Restricting foreign ownership of housing
Restricting foreign ownership of housing
The Government has announced that, effective from 1 April 2025, foreign persons (including temporary residents and foreign-owned companies) will be banned from purchasing established dwellings for two years.
Exceptions to the ban will include:
- Investments that significantly increase housing supply or support the availability of housing on a commercial scale; and
- Purchases by foreign-owned companies to provide housing for workers in certain circumstances.
The Government has announced it will provide the ATO with $5.7 million over four years from 2025-26 to enforce the ban, as well as $8.9 million over four years until 2028-29 and thereafter $1.9 million per year to implement an audit program and enhance its compliance approach to target land banking by foreign investors.
Currently, foreign investors can buy established properties under certain conditions, such as residing in Australia for work and study. Under the new ban, foreign persons will still be allowed to purchase vacant residential and non-residential land to build new properties. However, this will be subject to heightened scrutiny by the ATO to ensure compliance with development conditions, including subjecting the land to productive use within reasonable timeframes.
Impact of this change
The policy aims to support the availability of homes to Australians whilst encouraging foreign investors to contribute to an increase in housing supply. Although this is a minor change from the current position, it is intended to ensure the housing shortage is more appropriately addressed.
The Government also announced that a review will be undertaken after this two-year ban to determine whether this measure should be extended for a longer period.
BDO comment
BDO considers that this change will have a positive impact on the current housing crisis; however, for the measure to be effective, the ATO must focus on its screening and audit processes to apply the tougher stance on foreign investment approvals. The proposed screening processes are yet to be outlined, including what a ‘full audit’ will entail.
Additionally, the restrictions will be counterproductive if they reduce the amount of supply-increasing foreign investment in the housing market. It remains to be seen whether the increased ATO scrutiny will scare off such investment.