Australia to ban foreign investors from buying existing homes for two years

Australia has announced a two-year ban on foreign investors purchasing existing homes, starting April 1, 2025, as part of efforts to address the ongoing housing crisis. This policy aims to free up approximately 1,800 properties annually for local buyers.  The decision comes amid growing dissatisfaction with housing affordability, a key issue in the upcoming general elections.  "We're banning foreign purchases of established dwellings from April 1, 2025, until March 31 2027," treasurer Jim Chalmers said in a statement with housing minister Clare O'Neil.   The ban, which will run until March 31, 2027, is seen as a move to ease the pressure on housing supply. A review of the policy will be conducted to determine whether it should be extended further. 

Under the government’s plan, foreign investors – including temporary residents such as international students and foreign-owned companies – will not be allowed to purchase an established dwelling in Australia from April 1, 2025 until March 31, 2027.

 

 

They will still be able to purchase new dwellings, to encourage the supply of housing. 

 

The government will also crack down on land banking by forcing foreign investors who purchase vacant land to develop it within a reasonable timeframe. 

For new developments, foreign investors are restricted to owning no more than 50% of the property, ensuring local buyers and investors maintain a significant stake in the development.

 

Foreign owners of properties that remain vacant for six months or more in a year are subject to an annual vacancy fee. This is to discourage “land banking,” where foreign investors hold onto properties without using or developing them, driving up housing prices and limiting availability for local buyers.

 

Foreign investors are required to develop land they purchase within a certain period, ensuring that the land is used to build houses rather than being left idle, which can cause housing shortages.

   

This new measure is set to address the ongoing housing affordability crisis that has affected many Australians, particularly in large cities like Sydney and Melbourne. The Labor Party's policy is quite similar to a policy introduced by the previous Coalition government, which also sought to limit the impact of foreign investment in Australia's housing market. 

"In Sydney, housing values have jumped almost 70 per cent over the past 10 years, with the median dwelling price now around A$1.2 million (S$1.02 million)," Straits Times reported, qupting data from  property consultancy CoreLogic. Rents have also been climbing. 

 

" Overseas investors bought A$4.9 billion of residential real estate – including vacant land, new and established dwellings – in the 12 months ended June 30, 2023, according to the Australian Taxation Office. Established dwellings accounted for about one-third of the total," it added.

   

The key points of the policy include:

 

Foreign Buyers' Restrictions: The proposed ban targets overseas buyers of existing homes, not new homes or properties under development. This is aimed at reducing competition for limited housing stock, which is believed to drive up prices.

 

Policy Motivation: The move comes amid growing concerns that foreign investment in residential property has exacerbated Australia's housing affordability crisis. Many locals have been priced out of the market as overseas buyers, often with more capital, can outbid them.

 

Two-Year Timeframe: The ban will last for at least two years, though there will likely be a review of the policy after that period to assess its impact. The ban is designed to give time for the housing market to adjust and for more homes to be available for local buyers.

 

Long-Term Goal: The overarching goal of this policy is to make housing more accessible for Australians by controlling external demand and allowing the domestic housing market to stabilize. It's part of a broader effort to address the structural challenges facing Australia's housing system.

 

Impact on the Real Estate Market: The impact on the real estate market could be significant. By limiting foreign investment, the policy could potentially cool down housing prices in some areas. However, some experts worry that the ban could reduce the overall demand, which may slow down new development or hurt the economy in other ways.