On 31 March 2009, the Australian Government implemented changes to its foreign investment policy removing restrictions on temporary Australian residents who buy residential property.
Prior to these legislative changes, all temporary residents and non-residents including foreign businesses required approval by the Foreign Investment Review Board (FIRB) before purchasing.
The changes will streamline and update foreign investment screening for residential real estate acquisitions enhancing flexibility in the market, and reducing compliance costs for temporary residents and the construction industry. This will benefit the more than 7,500 foreign residents and businesses the FIRB approve each year. Residential real estate comprises more than 92 per cent of applications received by the FIRB.
The revised regulations are the first since 1989, and will also streamline notification arrangements, reducing post purchase conditions on the development of single blocks of vacant land, and will effectively treat temporary residents the same as permanent residents, provided they do not buy more than one established dwelling.
From 31 March 2009 the Foreign Investment Regulations Changed As Follows:
1. Temporary residents are no longer required to notify proposed acquisitions of established residential real estate for their own residence, new residential real estate and vacant residential land. Further, the restriction preventing student visa holders from purchasing a property valued at over $300,000 has been removed. The rule preventing temporary residents from purchasing more than one established dwelling has been maintained.
2. Accommodation facilities such as resorts and hotels are treated as commercial real estate rather than residential real estate. As a result, rather than all purchases of short term accommodation units being subject to residential real estate rules, notification will now only be required where the value of the property exceeds the commercial property thresholds ($50 million or $5 million for heritage listed properties).
3. The definition of temporary resident as a person with a visa of at least 12 months duration has been updated to cover temporary residents with shorter term visa and long term bridging visa holders. Short term visitors, for example, with tourist or certain classes of business visas will continue to not be considered as temporary residents.
4. Streamlined administrative procedures have been established for non-resident foreign persons, foreign-owned companies and trust estates to notify and receive approval for acquisitions of vacant residential land and new dwellings. Streamlined notification arrangements have replaced the current administrative system which takes up to 30 days for approval.
5. The conditions on acquisitions by non-resident foreign persons of single blocks of vacant residential land has been removed except for a requirement to begin its development within 24 months. Currently development must commence within 12 months (this period is often extended) and at least 50 per cent of the value of the purchase price of the land must be spent on construction of a dwelling.
6. The condition that no more than 50 per cent of new dwellings be sold to foreign persons will be abolished provided developers market locally as well as overseas.
7. The definition of “new dwelling” has been extended to include those that have not been sold but that have been rented for no more than 12 months. This will provide more flexibility to developers to temporarily rent out units until buyers are found.
8. Foreign companies are allowed to purchase established dwellings for the use of their Australian based staff.
For a more detailed explanation of Australia’s Foreign Investment Policy, visit the Foreign Investment Review Board website at www.firb.gov.au