Australia imposes temporary ban on foreign purchases of established dwellings and cracks down on land banking

Effective from 1 April 2025, foreign investors (including temporary residents and foreign-owned companies) will no longer be able to purchase established dwellings in Australia unless an exception applies. This restriction will remain in place until at least 31 March 2027, with a review scheduled before the ban’s expiration to assess whether it should be extended.

While the ban is broad, there are some notable exceptions. Foreign investors who meet specific criteria may still be allowed to purchase established dwellings. These include:

• Investments that contribute to housing supply: Foreign investments that help to significantly increase the availability of housing, either through the construction of new homes or other initiatives that benefit Australian residents, may still be approved.
• Pacific Australia Labour Mobility (PALM) Scheme: Purchases related to this scheme will also be exempt.

Additionally, foreign purchases of established dwellings will be continuously permitted for:

• Permanent residents of Australia
• New Zealand citizens
• Spouses of Australian citizens, permanent residents, or New Zealand citizens, provided the property is purchased as joint tenants.

To ensure compliance with these new restrictions, the Government will strengthen its screening processes for foreign investment proposals related to residential properties. This will include enhanced checks on established dwellings and heightened enforcement efforts.

A central focus of these changes is addressing the issue of land banking. The Australian Taxation Office and the Treasury have been provided with a budget of $8.9 million over four years from 2025-2028 and $1.9 million ongoing from 2029-2030 to implement audit program and enhance their compliance approach to target land banking by foreign investors and to ensure compliance with development conditions by foreign investors who have received approvals from the Treasurer to purchase established dwellings. If foreign investors fail to develop vacant land according to the terms of their approvals, they may face penalties or other enforcement actions.

The new policies are part of a broader strategy to tackle housing affordability in Australia. By limiting foreign ownership of established dwellings, the Government aims to ensure more housing remains available to Australian citizens and residents. The crackdown on land banking is intended to ensure that vacant land is developed promptly to contribute to the growing demand for housing.

Land banking has become a significant issue, particularly in urban areas where land is in short supply. The policy is designed to address this problem by compelling foreign investors to meet development timelines and help alleviate the housing shortage.

The temporary ban will be reviewed before its scheduled end date of 31 March 2027. During this review, the Government will evaluate the policy’s effectiveness in improving housing affordability and increasing housing availability. Depending on the outcome, the ban may be extended or modified.

The Australian Government’s decision to temporarily restrict foreign purchases of established dwellings, coupled with a stronger focus on land banking enforcement, demonstrates its commitment to addressing the nation’s housing challenges. While these measures will limit foreign investment, they include exceptions that encourage investment in housing supply. Through enhanced oversight and audits, the Government aims to ensure that residential land is developed in a timely manner to meet the needs of Australian communities.

The specific guidelines for these measures have not yet been published by the Treasurer and are subject to change. Investors should closely monitor these developments and any regulatory updates when planning their investments in Australia’s residential market.