Previously, the on-sale of an off-the-plan apartment was regarded as a second-hand sale, which was not open to foreign buyers who are only able to buy new dwellings.
“This is most welcome news and will minimize the negative impact of off-the-plan sales to foreign purchasers not being completed’, said Mr Sanders, President of the Real Estate Institute of Australia.
“The Government needs to be commended in the promptness with which it responded to industry approaches on this matter. Following industry concerns the REIA first approached the Government on this issue in mid October with a result in a little over a month.”
The changes will apply immediately and regulation change will be made soon to enable developers to acquire New Dwelling Exemption Certificates for foreign buyers of these recycled off-the-plan homes.
“By eliminating an element of risk, this change will encourage developers to continue to add to the supply of housing which is much needed and the intent of the FIRB arrangements”, added Mr Sanders.
“The Government has addressed an anomaly in the FIRB rules in a pragmatic way. It is a common sense approach to not treat a dwelling that has just been built and for which the title has not changed as an established dwelling”, concluded Mr Sanders.
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 established 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.
- 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 lodgementfor 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.
Different factors apply depending on whether the type of property being acquired will increase the housing stock or whether it is an established dwelling.
An established dwelling is a dwelling (except commercial residential premises such as hotels, motels and caravan parks) on residential land that is not a new dwelling.
Foreign non-residents cannot purchase established dwellings as homes, for use as a holiday home, or to rent out.
Foreign persons that operate a substantial Australian business may apply to purchase established dwellings to house their Australian based employees. Eligible applications are normally approved subject to conditions, including that the dwelling is sold if it is expected to remain vacant for more than six months. Whether a business is eligible to purchase established dwellings to house their Australian-based employees is subject to a number of factors.
Foreign persons that operate a substantial Australian business generally need to apply for and receive foreign investment approval to purchase established dwellings in Australia to house Australian-based employees.
Foreign persons will be required to show they are operating a substantial Australian business to be eligible for approval to purchase one or more established dwellings under this category. To determine whether a business is substantial, consideration will be given to the turnover, profit and asset base of the business, as well as the number of Australian-based employees (both Australian and foreign) employed by the business.
Foreign persons would not be eligible to purchase an established dwelling under this category where the dwelling would represent a significant proportion of its Australian assets.
Temporary residents will normally be allowed to purchase only one established dwelling to live in as their residence (home) in Australia, subject to the conditions that they:
- Use the property as their principal place of residence in Australia;
- Do not rent any part of the property, included ensuring that the property is vacant at settlement; and
- Sell the property within three months from when it ceases to be their principal place of residence.
Temporary residents are not permitted to purchase established dwellings as investment properties, or rent out, or as holiday homes.
Foreign controlled companies are generally prohibited from purchasing established dwellings, although foreign companies with a substantial Australian business may be permitted to acquire established dwellings for the purpose of providing housing for their Australian based staff.