Many Australians believe that foreigners are outbidding Australian residents at suburban sales of established properties. They believe that foreigners are partially to blame for escalating property prices over recent years, particularly in the major cities, and this has made it difficult for Australian buyers.
The truth about foreign ownership
The reality is that this is not actually the case. The Foreign Investment Review Board (FIRB) rules stipulate foreign persons, including temporary residents, can apply for a residential land exemption certificate which will allow them to purchase one property including new (and near-new) dwellings or vacant commercial land. They cannot use this to purchase an established dwelling.
The only way foreign people can purchase established dwellings is in either of these two situations.
1. Temporary Resident
- Foreign buyers must live in it as their residence (home) in Australia. They cannot purchase an existing dwelling as an investment property, or to rent out, or as a holiday home. The conditions of purchase include:
- They use the property as their principal place of residence in Australia
- They do not rent any part of the property, included ensuring that the property is vacant at settlement
- They must sell the property within three months from when it ceases to be their principal place of residence
When they decide to sell their Australian property, they must sell to an Australian resident.
2. Substantial Australian business operator
If they operate a substantial Australian business and wish to purchase established dwellings in Australia to house Australian-based employees. To do this, they must obtain approval, and approval is only granted after extensive investigation of a number of factors including size and location of business, availability of rental premises in the business location and a range of other criteria. Approvals will normally be subject to the conditions that:
- the dwelling is to be used solely to accommodate Australian-based employees of the business; and
- the foreign person sells the dwelling if it is expected to remain vacant, or has remained vacant, for six months or more.
Many of our foreign clients with Australian property portfolios would like to see these restrictions abolished. They know that if foreign investors were bidding on existing dwellings, prices would sky rocket.
However, they also acknowledge that this would have a negative impact on Australian residents and create a very volatile property market. The FIRB regulations have been put in place to regulate the Australian property market for the benefit of both residents and non-residents.
The truth is that the existing dwelling section of the property market has not been flooded with foreign investors flying in with wallets full of money, locking out the locals.