Foreign Investors – Buying property as a foreigner or Tempor
The Australian Government (based in Canberra, Australia’s capital city) is aware of the fact that some of Australia’s citizens are cautious about foreign individuals or companies buying residential real estate (defined as all Australian real property, including vacant land).
It wants to ensure that the foreign real estate ownership it does allow is of benefit to the community and in keeping with the community needs. Therefore, the Australian Government insists that all applications from foreign citizens or companies to buy residential real estate (either already developed – such as houses and apartments – to be developed, to be redeveloped or existing only at plan stage) are put before the Foreign Investment Review Board (FIRB), one of its advisory boards.
This advisory board reports to Treasury and reviews all applications by to purchase residential real estate, no matter what the value of the intended purchase is, by anyone who is NOT an Australian citizen, an approved migrant, a permanent resident of Australia, a foreign national holding a permanent visa or a person who, despite being a foreign citizen, is entitled to permanent residence status in Australia, should they take it up, such as a citizen of New Zealand. These people are holders of “special category visas”.
There are many different classes and categories of visas. Click here for an overview of the various visa classes which can be applied for by foreign citizens.
There are usually no problems when the foreign spouse of an Australian citizen applies to be allowed to purchase property with his/her spouse on a 50/50 or “Joint Tenant” basis, but there still must be an application to the FIRB.
How long does an FIRB review take?
Thirty days is needed for an application to be looked at by the FIRB. There are no “general” approvals available. An approval can only be granted on a specifically nominated property. Therefore, real estate contracts with foreign citizens must contain a clause saying that going ahead with the purchase is conditional upon getting FIRB approval and that 30 days must be allowed for that approval to be granted or denied.
What influences an FIRB decision?
If the FIRB feels that the residential real estate in question is only being purchased by a foreign citizen or company just for the purpose of renting it out, or because the purchaser wants to speculate on the property’s future value, permission to purchase will be refused.
On the other hand, approval IS usually granted to foreign applicants in the following circumstances:
A. Where the applicant is residing in Australia on the basis of a Temporary Entry Visa (with more than 12 months validity) and is wanting to buy a residence for themselves – as long as the property is sold when the person no longer lives in Australia Applicants who are entitled to purchase on these terms include students over 18 studying at a recognised tertiary institution for more than one year who need accommodation, but a general limit of $300,000 applies to the value of any such property acquired by a student temporarily resident in Australia. Other applicants entitled to purchase are long stay retirees and people in Australia for work reasons who need accommodation. Again, any property must be sold when these categories of buyers no longer live in Australia.
This category does not cover people with visitor or bridging visas.
B. Where a company from a foreign country wants to provide housing for its senior executives while they are posted to Australia for more than 12 months – again, as long as the property is sold when the employee is no longer living in Australia. These senior executives have to be specifically named. Usually, the purchase of two houses per company are permitted.
The purchase of another residence, such as a “weekender” for recreational use, is not approved under any of the above circumstances.
Buying a property from a developer
Apartments or townhouses in a proposed development, or in a development which has just been completed but has not yet been occupied or sold, can be sold to foreign investors as long as the developer applies in advance for this to be allowed. If a foreign citizen buys a property in this way (often called “buying off the plan”), the property, when built, can be rented out, sold or used by the purchaser. However, foreign interests cannot hold more than half the apartments or townhouses in any one development.
You should ask to see a copy of the developer’s approval letter to ensure that FIRB approval exists for sales to foreign citizens.
You should be aware that, on purchase of any apartment, new or old, you are liable to pay regular levies (payable weekly, monthly, quarterly or annually) to cover the costs of the property and grounds that all the residents use. A group known as the body corporate, made up usually of your fellow owners, is responsible for collecting levies for two funds, called an Administration Fund and a Sinking Fund. These funds go towards servicing the lifts, repainting the building, lighting the hallways – the various maintenance jobs that benefit all residents. If you are buying into an apartment block with, for example, a gym, swimming pool, rooftop tennis court and so on, levies will be comparatively high.
If you are planning to buy an apartment, your legal representative will need to make a Strata Records Inspection. This will outline how much the levies are at the time of purchase. Such an inspection will also tell you the rules governing use of common facilities, whether or not pets are permitted as so forth.
Purchasing within a resort
If the Australian Treasurer nominates that a particular resort is an Integrated Tourism Resort, then both residences and vacant land can be purchased within that resort by anybody without any FIRB assessment taking place. The seller of any such property would make this status known to all prospective purchasers.
To be considered an Integrated Tourism Resort, a place must fulfil certain conditions, such as covering at least 50 hectares of land within defined boundaries, have extensive recreational facilities, and so forth.
Commercial real estate
FIRB approval must be sought by any foreign individual or company which wants to purchase existing commercial and non-residential real estate valued at $5 million or more. They are normally approved unless considered “contrary to the national interest”.
If the commercial and/or non-residential real estate in question does not yet exist but is at the development or major redevelopment stage, permission to purchase is usually given, unless the purchase is considered “contrary to the national interest”.
Construction must start within a specified period of time.
Migrating to Australia?
If you are interested in buying property in Australia because you want to migrate to Australia on a Permanent Residence Visa (with a view to taking up Australian citizenship at a later date), it is perhaps premature to investigate the purchase of property before your eligibility for a PRV is assessed. PRVs are only granted after assessment of many factors. Some of these are nomination by an employer, affiliations with family members already living in Australia and the business skills you can offer Australia.
Applications to FIRB
Applicants must write to:
The Executive Member
Foreign Investment Review Board
c/- The Treasury
Canberra ACT 2600
and request a Form 3 Notice under Section 26 of the Foreign Acquisitions and Takeovers Act 1975.
The type of information required by FIRB includes your name, address, nationality, type of property you are interested in, a copy of the contract, your passport number and other details relevant to the type of category of purchase you want to make.
If, for example, you want to buy under one of the temporary resident categories outlined before, the FIRB will want to see a signed statement that the residence will not be rented out, and will be sold to Australian or other eligible purchasers when you leave Australia.
Your legal advisor can let you know exactly what information is required by FIRB, or you can make a general enquiry by phoning 61 6 263 3795 or faxing 61 6 263 2940.
If FIRB approval is given for a foreign citizen or company to buy vacant land, or an existing property which is to be converted into residential property (eg a former factory or warehouse), the purchasers must start the building or refurbishing work within a year of receiving approval to purchase and there would need to be proof that the building/refurbishing will be of assistance to the community and its housing needs.
Fines on individuals of up to $A50,000 and on companies of up to $A250,000 can be imposed if there is no notification for prior approval received by the FIRB and property is nevertheless bought.