Investing in Australia is coming a very popular choice for many overseas investors for a number of reasons:
Diversifying their investment portfolio
Providing accommodation for their children whilst studying in Australia
Purchasing an investment property and then converting it to their residence as part of a pre-retirement strategy
There are a number of Government requirements as detailed below for overseas investors.
Foreign Investment in Residential Real Estate
Under Australian law, the Foreign Investment Review Board (FIRB) examines proposals by foreign persons to acquire interests in residential real estate in Australia, and makes recommendations to the Government on whether those proposals are suitable for approval under its foreign investment policy.
Australia’s eligibility rules for foreign investors in residential real estate are designed to ensure that foreign investment in residential property adds to residential housing supply and promotes new construction activity.
Following changes to the screening arrangements announced in April 2010, all foreign investors require FIRB approval before buying any residential real estate in Australia.
The policy restricts access to established (second-hand) residential property by foreigners. Foreign buyers who do not live in Australia are prohibited from buying established dwellings, while temporary residents are permitted to purchase one established dwelling as their residence in Australia. They cannot avoid the rules by acquiring property jointly with, or in the name of, an Australian citizen or resident, or via a company or trust. The policy also requires that temporary residents must sell their established properties when they leave Australia.
FIRB routinely monitors compliance with the policy. Real estate agents should ensure they fully understand the policy, as there can be severe penalties for non-compliance.
Breaches of the Foreign Acquisitions and Takeovers Act 1975 can result in divestment of the property, as well as fines and/or imprisonment for foreign purchasers. Foreign investors may forfeit their deposit and may also be liable for damages for breach of contract.
Breaches may also have consequences for real estate agents. You may be liable for civil damages if you do not accurately advise foreign purchases about their obligations under the policy. You may also be liable to pay penalties and compensation under consumer protection legislation (including the Trade Practices Act 1974).