Recent Developments in Foreign Investment Regulation

Key Takeaways

• Australia’s recent policy changes on foreign investment, particularly the exceptions for Build-to-Rent (BTR) developments, aim to attract foreign capital and potentially alleviate the country’s housing supply issues.

• The 2-year ban on foreign purchasers of established residential properties includes exceptions for projects that significantly increase housing stock.

• Reduced Foreign Investment Review Board (FIRB) fees for BTR projects make these investments more attractive to foreign investors.

• These reforms create a strategic pathway for foreign capital to engage with Australia’s housing market, aligning with national housing priorities.

Policy Changes and Exceptions

Effective from 1 April 2025 to 31 March 2027, the Australian government has implemented a 2-year ban on foreign investors purchasing established residential dwellings. This measure aims to reduce competition from foreign buyers and prioritise access for Australian residents. However, subject to foreign investment approval, the ban includes several key exceptions to the policy:

1. Redevelopment Projects: Foreign persons may purchase established dwellings for redevelopment that significantly boosts housing stock, such as creating at least 20 additional dwellings.

2. Commercial Scale Housing: Acquisitions that support housing availability on a commercial scale, including multi-unit developments like retirement villages, aged care facilities, or student accommodation.

3. BTR Developments: Foreign persons may purchase qualifying BTR developments.

These exceptions align with the government’s focus on attracting capital to sectors that increase Australia’s housing supply, particularly through new housing stock.

BTR Exception To qualify for the BTR exception and access reduced foreign investment application fees, a development must meet specific criteria:

• the development must contain at least 50 dwellings;

• each dwelling must be available for rent to the general public, excluding student accommodation, land lease communities and retirement villages;

• dwellings must be offered on lease terms of at least 5 years, although tenants may request shorter terms;

• all dwellings must be owned by a single entity at all times; and

• at least 10% of the dwellings must be affordable, as defined in the Income Tax Assessment Act 1997.

These requirements ensure that BTR developments contribute to Australia’s long-term rental supply and align with national housing objectives.

The conditions for BTR development require that land acquired must maintain its BTR use for either the duration of the investor's ownership or 15 years from the occupancy certificate issuance, whichever is shorter. For existing BTR developments, the project must remain BTR as long as the investor retains an interest.

Concessional fee for BTR Investments

A significant change supporting the BTR pathway is the reduction in FIRB application fees for land acquisition intended for BTR developments. Traditionally, residential land attracted higher application fees than commercial land, creating a cost barrier for foreign investors. However, FIRB applications for BTR developments are now subject to commercial land fee tiers, significantly reducing the costs. Applicants must expressly request the concessional fee treatment in their FIRB application for it to be considered.

Conclusion

The BTR sector is rapidly gaining traction in Australia, drawing significant interest from institutional investors both within the country and internationally. By exempting eligible BTR developments from the general prohibition on foreign investment in residential land and aligning application fees with those applicable to commercial land, the government has established a strategic avenue for foreign capital to participate in Australia's housing market. These regulatory adjustments offer a more transparent and commercially attractive framework for foreign investors, underscoring that well-structured foreign investment is encouraged in sectors that align with national priorities.

To read more about the FIRB policy changes, click here to access Guidance Note  6.  For assistance on how these policy changes may affect you, please contact one of our people.

Ron Zucker 0410 590 111

Eollyn Cortes 0478 727 395

Sagang Chung 0431 435 333

Julia Zou 0426 670 202