Can foreigners buy investment property in Australia?

author-avatar By
on May 19, 2022
Can foreigners buy investment property in Australia?

Australia is often viewed as an attractive travel destination for overseas residents, but what about for property investors?

According to a 2021 report from the Australian Government’s Foreign Investment Review Board (FIRB), foreign demand for residential real estate in Australia has declined since 2015-16. Combined investment in commercial and residential real estate by foreign buyers totalled $80.8 billion last financial year, a loss of $7 billion from the 2019-2020 financial year across the combined foreign real estate investment industry. Commercial property made up $70.4 billion of this, while residential property made up the remaining $10.4 billion.

Investors from the United States ($20.8 billion) were the biggest buyers of Australian real estate, followed by investors from Singapore ($13.8 billion), Germany ($7.5 billion), Canada ($7.3 billion) and China ($6.3 billion).

Here we’ll look at how foreigners can invest in Australian property, the application process and the costs involved.

Can foreigners buy investment property in Australia?

Foreigners can buy an investment property in Australia but there are rules and regulations around the type of housing they can purchase.

Foreigners, or non-residents, must apply to the FIRB for approval to buy their desired investment property.

According to the FIRB, the government’s policy is to channel foreign investment into new homes, creating jobs in construction and supporting the economy as a whole.

While foreign investment in real estate can also fuel government revenue (e.g. through stamp duty and taxes), the FIRB says the overarching principle against which applications are generally considered is that the investment should increase housing supply.

With that principle in mind, the types of dwellings foreign investors can purchase are:

  • New buildings: These are usually approved without conditions.

  • Vacant land: Investors will be approved for this provided construction of a dwelling is planned to be completed within four years.

  • Established dwellings: Foreign investors can only buy these if they plan to knock the existing dwelling down and replace it with a greater number than there were previously. For example, if a foreign investor bought a house, demolished it and replaced it with two townhouses.

  • Buying a home to live: Foreign investors can buy a home to live in if they are a temporary Australian resident. However, the home must be sold if you leave it unless you become a citizen or permanent resident.

What to consider prior to investing as a foreigner

If you’re a foreigner looking to purchase a property in Australia, it’s important to consider what makes a good investment property here, as it may differ from your country slightly.

Location is arguably the number one priority for Australian investors, with proximity to a CBD or the beach certain to be attractive to a wide range of people. Proximity to amenities like shops, restaurants, schools, hospitals, and public transport are also significant drawcards.

The location of a property should also have potential for capital growth, high demand and maximum appeal to owner-occupiers.

Once you’ve settled on a location you can start thinking about the property itself and the desired demographic you wish to target to live there.

What is the FIRB application process?

Foreigners are required to have approval from the FIRB prior to acquiring an interest in a property. An interest includes things like signing an unconditional contract or an option that provides the right to purchase a property at an agreed time in the future.

Should you believe you may lose the home to another buyer by waiting for approval, you can enter into a contract provided it’s conditional on receiving approval.

The application for approval from the FIRB is as follows:

  1. Go to the Australian Tax Office (ATO) website and click ‘Start your application’ on the ‘Foreign Investment in Australia’ page.

  2. Fill out the form with all relevant personal details, passport and visa details.

  3. Provide details of the dwelling you wish to purchase.

  4. Sign and submit the application, paying the appropriate fee.

  5. Wait to hear back on the decision of your application. There is a statutory period of 30 days available for the decision to be made and a further 10 days to notify the applicant of the outcome.

FIRB fees and penalties

There is a fee payable as part of the FIRB application process, with the amount dependent on the purchase price of the dwelling. The fees are in the table below:

Purchase price

Fee

$1 million or less

$6,350

$1 million - $1,999,999

$12,700

$2 million - $2,999,999

$25,400

$3 million - $3,999,999

$38,100

$4 million - $4,999,999

$50,800

$5 million - $5,999,999

$63,500

$6 million - $6,999,999

$76,200

$7 million - $7,999,999

$88,900

$8 million - $8,999,999

$101,600

$9 million - $9,999,999

$114,300

Source: FIRB. Correct as of April 2022.

Foreign investors are required to contact the ATO for a fee estimate for purchases exceeding $10 million.

If a foreigner acquires property without approval they may be fined up to $166,500 or face three years in prison. If a company does the same it could face up to $832,000 in fines. The same fines for individuals apply if a temporary resident fails to sell their property when they stop living there or if they don’t start construction on land within the required four year period.

Exemptions for Australian residents abroad

If you’re an Aussie abroad, the rules around foreign investment probably won’t apply to you, with a number of other groups also exempt.

Groups that are exempt from needing approval from FIRB are:

  • Australian citizens

  • New Zealand citizens

  • Australian permanent visa holders

  • Foreigners purchasing property as joint tenants who have a spouse which satisfies one of the above.

Home loans for foreigners

Obtaining a home loan as a foreigner is no easy task in Australia. A basic requirement of many lenders is to be an Australian citizen or permanent resident.

This is due to lenders viewing overseas borrowers as high risk, as their systems aren’t typically set up to appropriately deal with such customers. The FIRB noted some of the reasons why the number of foreign investors in Australia is declining:

  • a tightening of domestic credit and increased restrictions on capital transfers in home countries

  • state taxes and foreign resident stamp duty increases

  • the introduction of an EC so that only one approval is required for individuals considering a number of residential properties with the intention to purchase only one property

  • foreign investment application fees.

Lenders who do offer home loans to foreigners often implement stricter restrictions than they would typically impose on Australian borrowers.

Foreigners may be required to front a larger deposit for the property, greater than the typical 20% lenders recommend.

Loans for foreigners also typically have substantially higher interest rates than regular loans.

In some cases, lenders may require foreigners to have an income earned in Australia.

Savings.com.au’s two cents

The government has made it fairly straightforward for foreign investors to purchase residential property in Australia in an effort to fuel housing supply.

If you’re a foreigner looking to buy in the land down under, consider speaking to a local professional to ensure you’re getting a good deal.


Article first published 13 November 2020 by Alex Brewster. Updated 10 May 2022.


Advertisement

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS
NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 27, 2022. View disclaimer.


Image by Tania Richardson via Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

Latest Articles

author-avatar
Jacob Cocciolone joined the Savings team in 2021 as a Finance Journalist. Driven by a passion for keeping Australians up to date with the latest financial news and trends, his areas of interest include financial technology, investing, property and motoring.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy