Australia tightens foreign investment rules for residential property from 1 April

On 16 February 2025, the Australian Government announced major changes to foreign investment rules for residential property, signalling a shift in policy aimed at improving housing affordability and accessibility for local buyers.

From 1 April 2025, a 2-year ban on foreign acquisitions of established dwellings will take effect, alongside stricter compliance measures and higher fees for certain transactions. We unpack the key aspects of these changes and their implications for foreign investors, developers and the broader housing market.

Temporary ban on foreign purchases of established dwellings

Under the new rules, foreign individuals (including temporary residents) and foreign-owned entities will be prohibited from purchasing established residential properties in Australia for 2 years, from 1 April 2025 to 31 March 2027. This measure represents a significant departure from past policy, which generally allowed foreign investors to acquire established homes under strict conditions, such as redevelopment requirements.

The primary objective behind this moratorium is to alleviate competition in the housing market and prioritise homeownership opportunities for Australians.

Exceptions to the ban

Despite the broad restriction, certain exemptions will apply:

• foreign investments supporting housing supply: Transactions that demonstrably increase the housing stock, such as redevelopment projects that result in a net increase in dwellings, will still be permitted
• Pacific Australia Labour Mobility scheme: Properties intended for accommodation under the scheme, which supports seasonal workers in key industries, will also be exempt.

While these carve-outs aim to maintain a level of foreign investment in the property sector, they are narrowly defined and will limit speculative acquisitions by foreign investors.

Higher foreign investment fees and tougher compliance measures

In addition to the temporary ban, the government will tighten foreign investment compliance and increase associated costs, including:

• tripling of application fees for established homes: Foreign investors seeking to purchase established properties under exceptional circumstances will face significantly higher application fees, reflecting a deliberate move to discourage such transactions
• doubling of vacancy fees: Foreign-owned properties left vacant for extended periods will now incur double the existing vacancy fees. This measure aims to ensure that foreign-owned residential properties are occupied and contribute to housing availability
• increased enforcement funding: The Australian Taxation Office and Treasury have been allocated $5.7 million over 4 years to strengthen monitoring and enforcement of foreign investment laws, targeting non-compliance and land banking practices.

These financial deterrents, combined with the temporary ban, mark a clear effort by the government to redirect foreign capital away from established housing and towards new developments that expand the housing supply.

Legal considerations for foreign investors and developers

Given the sweeping nature of these changes, foreign investors and developers should carefully assess their strategies and compliance obligations:

• existing approvals: Investors with pre-existing approvals should ensure they complete their transactions before the ban is enforced
• new developments as an alternative: Foreign buyers interested in Australian residential property may need to redirect their focus towards new developments, subject to Foreign Investment Review Board (FIRB) approval
• penalties for non-compliance: Most foreign investors are subject to development conditions when acquiring vacant land in Australia to ensure that it is put to productive use within reasonable timeframes and to avoid land banking. Stricter enforcement means that failure to meet these new rules can result in penalties, which have increased.

Navigating the new foreign investment landscape

The Australian Government’s latest foreign investment restrictions reflect a broader policy push to rebalance the housing market in favour of domestic buyers. Foreign investors and developers will have to adapt their strategies, ensuring full compliance with the evolving regulatory framework.

For investors and industry stakeholders, staying informed and seeking legal guidance will be crucial in navigating these complex changes. As the policy landscape continues to evolve, proactive engagement with regulatory requirements will be essential for those looking to participate in Australia’s residential property market.

If you have any questions about the changes and how it impacts you, please get in touch with our team below.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Jeanne Vallade

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