Property Investment for Foreigners
Australia has long been an attractive destination for foreign investors aiming to diversify and capitalize on the country’s stable economy.
The robust housing market excites many home buyers, but the rules are different for foreigners looking to enter property investment in Australia.
Specifically, the Government is ensuring that Australian homes are kept available for Australians – limiting foreign ownership in new developments and introducing an annual charge on foreign owners.
Let’s talk about property investment for foreigners, including what regulations govern expat foreign property ownership, eligibility requirements, the loan application process, and considerations for foreigners looking to enter property investment.
Are foreigners able to join Australia’s property investment?
Yes. Foreigners can buy an investment property regulated by the FIRB (Foreign Investment Review Board) rules and regulations. Home loans and purchases must apply for approval through the FIRB.
According to the FIRB site:
“The Government’s policy is to channel foreign investment into new dwellings, as this creates additional jobs in the construction industry and helps support economic growth. It can also increase government revenues, in the form of stamp duties and other taxes.”
The overarching principle by the FIRB is that Australia’s foreign investment property regulations are aimed to stimulate the housing industry and support the economy as a whole.
The types of residential property that foreign investors can purchase include:
New buildings: Foreign buyers are usually approved to buy new dwellings without conditions.
Vacant land: Investors can be approved provided that the construction in the land is completed within 4 years. You cannot simply buy land and hold it indefinitely.
Established homes: Foreign buyers can only be approved if they plan to knock the existing dwelling to upgrade it with a greater number of properties (e.g., a single detached house can be demolished and rebuilt as two townhouses).
Owner-occupier home: Temporary residents, such as those holding certain visa subclasses, may be allowed to purchase one established dwelling in which they will reside. However, you must sell the property once you leave unless you become a permanent resident or a citizen.
The Government is ensuring that dwelling in new developments remain available for Australians. Hence, they introduced a 50% cap on foreign residential ownership in new developments. This 50% cap builds on the existing rules to keep the housing supply accessible to all Australian buyers.
What is the FIRB application process?
Foreigners are required to gain approval from the FIRB prior to investing in property.
Make sure you follow the steps below to apply for foreign investment approval:
- Visit the Australian Taxation Office website and click “Start Your Application” on the ‘Foreign Investment in Australia’ page.
- Fill out the application form with your contact details, passport, visa documents, and any FIRB reference numbers.
- Provide the details of the property you wish to purchase.
- Read and sign the declaration.
- Submit it along with the appropriate fee.
- Wait for the decision on your application. Approval should be within 30 days, and a further 10 days for your notification of the application’s outcome.
Foreign investment application fees that go higher as the property value increases.
| Home Purchase Price | Foreign Investment Fee |
| $1 million or less | $6,350 |
| $1 million to $1,999,999 | $12,700 |
| $2 million to $2,999,999 | $25,400 |
| $3 million to $3,999,999 | $38,100 |
| $4 million to $4,999,999 | $50,800 |
| $5 million to $5,999,999 | $63,500 |
| $6 million to $6,999,999 | $76,200 |
| $7 million to $7,999,999 | $88,900 |
| $8 million to $8,999,999 | $101,600 |
| $9 million to $9,999,999 | $114,300 |
Source: FIRB as of 2022
These fees are payable at the time of applying. The maximum fee for a residential property worth $40 million is $503,000.
It is crucial for foreign investors to consult with legal and financial professionals who specialize in Australian property investment to navigate the complex regulations and ensure compliance. Talk to a legal expert or a mortgage professional before signifying interest to purchasing a property.
How much can I borrow?
Obtaining an expat foreign home loan is viewed as a high-risk proposition, which is why lenders and regulations have tightened restrictions on overseas borrowers and capital transfers.
Lenders that allow foreign home loans calculate the serviceability to work out the amount of loan you can borrow.
Generally, lenders will apply:
- A deposit usually higher than the 20% standard for typical home loans.
- 80-85% rental income from the chosen property.
- 60-90% of your actual income, usually exempt of bonuses, commission, and allowance income.
- Income from businesses outside of Australia may be approved in some cases.
- 100% foreign income for repayments if you are able to prove a strong and stable financial position.
- Loaded repayments on the foreign home loan to accommodate interest rate movements.
Who can buy a home without the approval of the FIRB?
Only foreigners and temporary Australian residents are required to secure an approval from the FIRB to purchase property in Australia.
These individuals are exempt from having to be approved by the FIRB:
- Australian citizens both living in and outside of Australia;
- New Zealand citizens;
- Holders of Australian permanent visa;
- Foreigners buying property as joint tenants with someone married belonging to any of the abovementioned groups.
What happens if foreign investors buy property in breach of the rules?
Getting approved by the FIRB isn’t easy, but it’s necessary to purchase property in Australia. If an individual does not adhere to the rules, he or she could face serious penalties.
From fines that could go up to tens of thousands, to a maximum criminal penalty of 10 years imprisonment or 15,000 ($3,300,000) units, it’s never worth the record smear and expenses to circumvent the FIRB rules.
For more information, see FIRB’s Guidance Notice 11.
Conclusion
Investing in Australian property as a foreigner offers opportunities for diversification and capital growth. However, it is essential to understand and comply with the rules and criteria established by the Australian government.
You can keep up-to-date with the regulations when you talk to our home loan professionals. We can facilitate proper due diligence so foreign investors can navigate the complexities of property investment in Australia and make informed decisions every step of the way.
Be sure to call us to discuss your investment property options. We’d love to talk to you today.
