Understanding the Australian property market
Major Australian cities have seen consistent property value growth over the years, making it appealing for foreign buyers looking for capital appreciation and investment opportunities. According to data from CoreLogic in 2022, dwelling prices in Australia increased by 382% over the 30 years prior.
Complying with Australian regulations will ensure a smoother property acquisition process and maximise the potential for returns on investment.
The government follows a policy of limiting foreign investment in property to new dwellings. The purpose of this is to increase Australia’s housing stock. Foreign investment in new houses can create extra jobs in the construction sector, support the economy and increase revenue for the government.
There is the opportunity to buy existing dwellings as well, but there are more stringent rules foreign buyers have to follow.
Does a foreign buyer need approval to buy property?
Yes, a foreign buyer must first get approval by applying through the Australian Taxation Office (ATO) website. All foreign investments in Australia require prior approval. This approval process ensures that foreign investments align with national interests.
Understanding regulations and gaining approval can be time-consuming and complex, requiring detailed documentation and understanding of legal requirements, which is where an experienced property lawyer can make a big difference.
Process of buying property for non-Australian citizens or residents
Non-citizens or residents usually require approval before proceeding with a property purchase. The ATO enforces rules and compliance for foreign buyers purchasing real estate in Australia. Some steps involved include:
- Set up your MyGov ID to establish your identify.
- Go to the online services for foreign investors section on the ATO website and follow all the steps to add and confirm your details.
- Lodge your residential application through the ATO portal and pay the associated fees.
- Monitor the status of your application.
Under the current guidelines, foreign investors and temporary visa holders no longer need to submit applications through the Foreign Investment Review Board (FIRB) application portal but instead must go through the ATO website.
Types of properties that can be purchased by foreign buyers
Australia offers various opportunities for foreign buyers, but there are certain restrictions.
New Dwellings
Foreign buyers are generally allowed to purchase new or off-plan properties that have not been previously occupied. These include apartments, houses, and townhouses. Property developers intending to sell new dwellings to foreign investors or temporary visa holders can seek approval on behalf of the customer. If this is the case, the foreign investor generally won’t need to submit a proposal for the purchase.
Vacant Land
Foreign buyers who invest in vacant land to develop a residential property will be approved on the condition that construction be completed within four years and the land is not sold until construction is completed.
Established Dwellings
Purchasing existing residential properties is more restricted if you’re not an Australian citizen or permanent resident. Non-residents typically cannot buy established homes unless they meet specific criteria, such as being temporary residents to live in the property or planning to redevelop the property where the redevelopment can increase housing stock in the country.
Buying property as a Permanent Resident vs Australian Citizen
Permanent residents do not need approval to buy residential property in Australia. They have the same rights as Australian citizens, although they may retain the passport of another country. This means they can purchase new and established dwellings without restrictions and do not pay additional stamp duty rates as foreign buyers would.
In essence, permanent residents benefit from a more straightforward purchasing process, lower costs and better financing access than foreign buyers.
Additional costs of buying property in Australia as a foreigner
Buying property in Australia as a foreign investor or temporary visa holder can come with a few other considerations, such as stamp duty surcharges, financing and tax.
As an example, foreign buyers who purchase a residential property in NSW are liable to pay surcharge purchaser duty. This is currently 8% of the dutiable value and is paid as an additional cost to transfer duty.
While it was previously identified that citizens of Germany, Finland, New Zealand, India, Japan, South Africa, Switzerland, and Norway did not have to pay surcharges for purchaser duty because of international tax treaties, this law has now changed. This means that citizens of these countries may need to pay the surcharge purchaser duty for any properties purchased in NSW after 8 April 2024.
As a property lawyer, we can only advise you on the legal aspects of purchasing property as a foreign investor. You may also need to speak to a tax consultant, accountant, financial adviser and mortgage broker to help you with other aspects of your property purchase. We can help you make these connections with trusted professionals in our network if needed.
Need legal advice about buying property in Australia? Speak to us
Investing in Australian real estate offers many attractive opportunities for foreign buyers, but understanding the regulatory landscape is important for a successful investment.
An experienced property lawyer such as RS Law Group can make it easier for overseas investors or temporary visa holders to understand Australia’s complex laws related to foreign property ownership.
We understand the legal requirements and can help you make an informed choice when buying a property in Australia.
We can guide you through the application process, ensure all documentation is correct and provide a smoother property-buying process by helping you better understand and comply with Australian regulations.
We can advise on strata laws and zoning regulations regarding the actual property purchase if applicable. As a property lawyer providing conveyancing services, we also review contracts and negotiate with sellers on your behalf to ensure your interests are protected throughout.
Contact our team today to learn more about our property law services for foreign buyers.
