The ban

In February 2025, Treasurer Jim Chalmers announced that foreign investors would be banned from purchasing ‘established homes’ for at least two years in an attempt to restrict land banking and its effects on the domestic housing supply.

2025-26 Budget Papers provide that temporary residents and foreign-owned companies would also be prohibited from purchasing established dwellings from 1 April 2025 to 31 March 2027 without a relevant exemption.

Importantly, the Foreign Investment Review Board (“FIRB”) provides that the ban includes the acquisition of land entities which hold established dwellings.

Foreign persons

Foreign Person is defined in s 4 of the Foreign Acquisitions and Takeovers Act 1975 (“FATA”) to include, primarily

1. Persons who are not ordinary residents; and
2. Corporations or trusts (via the trustee) in which a substantial interest or substantial aggregate of interests is held by persons who do not ordinarily reside in Australia.

Established Dwellings – Key Concepts

• Established dwellings are those which are not new or near-new dwellings.
• A new dwelling is a dwelling built on residential land which has not been previously occupied or sold as a dwelling.
• A near-new dwelling is a dwelling built on residential land in a residential development where a previous sale did not settle and which has been occupied for less than 12 months in total.
• Renovated or refurbished homes are established dwellings.
• New dwellings that replace a demolished home are established dwellings.

Exemptions

There are several exemptions to the ban. The first is investments that significantly increase housing supply, such as purchasing an existing home for redevelopment which increases supply by at least 20 additional dwellings.

Also exempt are acquisitions which support the availability of housing on a commercial scale, such as acquiring interests in multiple dwellings in multi-unit developments like assisted living facilities and student accommodation.

Further exemptions include:

1. foreign companies providing housing for certain workers such as under the Pacific Australia Labour Mobility (PALM) scheme;
2. purchases by permanent residents, New Zealand citizens and spouses of Australian citizens, permanent residents or New Zealand citizens (when purchased as joint tenants); and
3. Foreign individuals seeking to purchase existing Build-to-Rent developments.

FIRB Approval

Foreign purchases of existing residential dwellings, where permissible, may only be approved by way of a ‘no objection’ notification issued by the Treasurer or an exemption certificate detailing the number and value of interests that can be acquired for a specific period of time. Failure to comply may result in the imposition of infringement notices, civil and criminal penalties, or disposal orders issued by the Treasurer pursuant to s 69 of the FATA.

For further information on FIRB regulation, consult:

• Exemptions – Guidance Note 6: Residential Land
• Exemption certificates – Guidance Note 9: Exemption Certificates
• Infringements and penalties – Guidance Note 14: Compliance and Penalties (Residential Land)

Implications for lenders

In the FY22-23 financial year, approximately 1% of total residential property settlements was in Australia was attributable to foreign owners, representing $5.9b of the total $603b.

Finance for foreign purchasers is often advanced by non-traditional lenders, primarily because of the obstacles they face from banks, which can involve:

• Higher deposits and stricter LVR requirements;
• ‘Shading’ or discounting foreign and self-employed income;
• Preferencing income in certain currencies;
• Strict visa categories for eligibility; and
• Proof of existing FIRB approval.

In 2016, only 2% of NAB’s mortgage portfolio involved foreign borrowers, and Westpac’s official policy is that residential lending is not available to non-resident borrowers, demonstrating a limited market for foreign residential lending among the big banks.

Strategically, mortgagees providing loans to foreign persons and entities should consider whether the security property, or any property being purchased with loan monies is subject to FIRB approval, and scrutinise the purpose of loan monies with a view to the new restriction.

Lenders may also see a rise in foreign investors seeking funds for the purchase of:

• New or near new dwellings;
• Established dwellings for redevelopment purposes;
• Off-the-plan properties; and
• Vacant residential land

as alternative investments.

This information is of general nature only and Omega Law invites you to contact us for specific advice tailored to your needs and circumstances.