Purchase of Australian Property : FIRB Approval

News Flash : The Australian Assistant Treasurer announced changes on April 24, 2010 to the rules surrounding the purchase of established (ie. previously occupied) residential housing by temporary residents, and the rules surrounding the purchase of vacant land. Temporary residents are now (again) required to seek FIRB approval where acquiring established property and to sell the property when leaving Australia. See the Assistant Treasurers Media Release and a draft flow chart we have prepared regarding required approvals for the purchase of established property.  You should seek information directly from the FIRB if potentially affected - and we will shortly update our material to reflect the changes.

Foreign investors intending to buy real estate in Australia have relatively open access to the Australian market and mortgage finance but must seek prior approval from the Government through the Foreign Investment Review Board (FIRB) unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations. In this page we provide a very short summary of the regulations, specifically as they apply to residential real estate, but you are advised to visit the FIRB site (www.firb.gov.au) and seek professional advice. Please note the recent intended changes to regulations at the bottom of this page.

Purchase of Australian Urban Property

The following individuals are NOT required to seek approval for the purchase of Australian residential real estate:

• Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust;
• Foreign nationals who are the holders of permanent resident visas or are holders, or are entitled to hold, a ‘special category visa’ purchasing either in their own name or through an Australian corporation or a trust; and
• foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.

Foreign persons are normally given approval to buy:

• Vacant land for development, including house and land packages where construction has not commenced, subject to a condition imposed under the FATA that continuous construction commences within 12 months for residential developments, or 5 years for commercial developments not to be used for residential purposes; and
   
• New dwellings such as house and land packages, home units and townhouses purchased ‘off‑the‑plan’ that is under construction or newly constructed, but never occupied or previously sold. ‘Off‑the‑plan’ sales to foreigners are only permitted for new development projects or extensively refurbished commercial structures, which have been converted to residential, on condition that no more than half the dwellings in a development are sold to foreign persons.
   
• Certain categories of foreign nationals, who hold a visa that permits them to reside in Australia continuously for at least the next 12 months, may be given approval to purchase developed residential real estate (that is, second hand dwellings) for use as their principal place of residence (that is, not for rental purposes) while in Australia. A condition of such purchases is that the dwelling must be sold when the foreign nationals’ temporary resident visas expire, they leave Australia, or the property is no longer used as their principal place of residence.
   
• Foreign companies, with an established substantial business in Australia, buying for named senior executives resident in Australia for periods longer than 12 months, may be eligible for approval provided the accommodation is sold when no longer required for this purpose. Whether a company is eligible, and the number of properties that may be acquired, will depend upon the extent of the foreign company’s operations and assets in Australia. Unless there are special circumstances, foreign companies normally will not be permitted to buy more than two houses under this category. Foreign companies would not be eligible under this category where the property would represent a significant proportion of its assets in Australia.
   

Proposals by foreign persons to acquire developed residential real estate that do not fall within the above categories are subject to the FATA but are not normally approved. 

Proposed acquisitions of developed non‑residential commercial real estate are normally approved unless they are determined to be contrary to the national interest.

Proposed acquisitions of residential property (both vacant land and existing dwellings) which are within the bounds of a resort that the Treasurer had designated as an ‘Integrated Tourism Resort’ (ITR) prior to September 1999 are exempt from examination. For resorts designated as ITRs from September 1999, the exemption only applies to developed residential property, which is subject to a long term (10 years or more) lease to the resort/hotel operator, making it available for tourist accommodation when not occupied by the owner. All other property, including vacant land for development, within the ITR would be subject to the normal foreign investment restrictions. Strict conditions must be fully met to qualify for ITR status.

Proposed acquisitions of hotels and motels operating under one title are normally approved (unless considered contrary to the national interest) under the tourism sector policy. Proposed acquisitions of strata titled hotel accommodation may be approved in certain designated hotels. Full details of the requirements for designated hotels are contained in the Foreign Investment Policy Urban Land (Real Estate). Other accommodation facilities such as guesthouses, hostels, holiday flats and undesignated strata titled hotels or motels are examined under policy applying to the residential real estate sector.

All contracts by foreign persons to acquire interests in Australian urban land should be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract.  Contracts should allow a minimum of 40 days from date of lodgement for such a decision.  Foreign investors are in breach of the FATA if they enter an unconditional contract to acquire property before approval is granted and may be subject to significant penalties.

Recents Changes - Announced but subject to changes in Regulations in 2009

• The definition of “temporary resident” for FIRB purposes as a person with a visa of at least 12 months duration will be updated to cover temporary residents with shorter term visas and long term bridging visa holders. Short term visitors, for example, with tourist or certain classes of business visas will continue to not be considered as temporary residents.
   
• The restriction preventing student visa holders from purchasing a property valued at over $300,000 will be removed. The rule preventing temporary residents from purchasing more than one established dwelling will be maintained.
   
• Temporary residents will be exempted from notification of proposed acquisitions of established residential real estate for their own residence, new residential real estate and vacant residential land.
   
• Streamlined administrative procedures will be established to facilitate non-resident foreign persons notifying and receiving approval for acquisitions of vacant residential land and new dwellings. Streamlined notification arrangements will replace the current administrative system which takes up to 30 days for approval.
   
• The definition of "new dwelling" will be extended to include those that have not been sold but that have been rented for no more than 12 months. This will provide more flexibility to developers to temporarily rent out units until buyers are found.
   
• Foreign companies will be allowed to purchase established dwellings for the use of their Australian based staff.

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