Foreign Investment Freeze: Australia imposes two-year ban on established home purchases and cracks down on land banking

Proposed ban on established dwellings

What is the proposed ban?

From 1 April 2025, foreign investors will be prohibited from purchasing established residential dwellings, unless an exception applies.  This prohibition will remain in place until at least 31 March 2027, with a review scheduled before the ban’s expiry date to assess whether it should be extended.

The proposed ban forms part of a broader strategy to tackle housing affordability in Australia. By restricting foreign investment in established residential dwellings, the Government aims to ensure more housing remains available to Australian citizens and residents.

Prior to this proposed change, foreign investors were permitted to buy existing property in limited circumstances, such as when they were coming to live in Australia for work or study. Now all foreign investors (including temporary residents and foreign-owned companies) will be barred from purchasing established residential dwelling, unless a recognised exception applies.

The announcement from the Treasurer fails to clarify how the proposed ban will apply to foreign investors who:

• have applied for FIRB approval;
• have been granted FIRB approval or an exemption certificate;
• have entered into a land contract in reliance of a FIRB approval or an exemption certificate; or
• are settling a land contract for the purchase of an established dwellings,

before the 1 April 2025 effective date. Where a foreign investor has an existing FIRB approval or exemption certificate, they will likely be able to rely on their existing approval and proceed with their purchase.

What are the exceptions?

While the proposed ban is broad, there are a limited number of exceptions available:

• (investments that increase the housing supply): investment that significantly increases the availability of housing or support the availability of housing supply may still be approved; and
• (Pacific Australia Labour Mobility (PALM) Scheme): purchases related to this scheme will also be exempt.

Additionally, purchases of established dwellings will still be permitted by:

• permanent residents of Australia;
• New Zealand citizens; and
• spouses of Australian citizens, permanent residents, or New Zealand citizens (provided the property is purchased as joint tenants).

It is important to note that the proposed ban will not restrict or prohibit foreign investment in newly constructed homes or off-the-plan properties (as this investment does not reduce the existing housing supply).  The ban will only apply to established residential dwellings.

How will this ban be enforced?

To ensure compliance with the newly proposed ban on establish dwellings, the Treasurer has confirmed that the Government will strengthen its screening processes for foreign investment proposals related to residential property (including enhanced checks on establishment dwellings).

Cracking down on land banking

In addition to the blanket ban on acquisitions of established dwellings, the Government proposes to crackdown on harmful land banking practices from foreign investors.  In doing so, the Government proposes to target foreign investors who have received approval in the past to acquire an established dwelling, but who have not taken steps to comply with the development conditions imposed by FIRB when that approval was granted.

To achieve this compliance measure, the Government is committing $8.9 million to the ATO and Treasury over the next four years, with an additional $1.9 million from 2029. This funding will support the implementation of an audit program designed to target non-compliance with land banking restrictions by foreign investors.

Caution for Aussie citizens buying for foreign persons

Australian citizens or permanent residents who consider acquiring and holding property on behalf of their foreign family members to circumvent these announced restrictions should reconsider this high-risk arrangement.  Most states and territories require purchasers to make declarations about whether they are purchasing the land for their own purpose or on trust for another person.

A purchaser who provides a false declaration and does not disclose they are acquiring and holding a property on trust for a foreign person may commit an offence.