Housing Market: Ban on Foreign Home Purchases
In response to Australia's housing affordability crisis, the government has announced a two-year ban on foreign investors purchasing existing homes. This measure, effective from April 1, 2025, to March 31, 2027, aims to increase housing availability for local buyers. Treasurer Jim Chalmers and Housing Minister Clare O'Neil stated that the ban is expected to free up approximately 1,800 properties annually for Australians.
Key Details of the Ban:
Scope: The ban prohibits foreign investors, including temporary residents and foreign-owned companies, from purchasing established dwellings in Australia during the specified period.
Exceptions: Limited exceptions include investments that significantly increase housing supply or support its availability, as well as provisions for the Pacific Australia Labour Mobility (PALM) scheme.
Enforcement: The Australian Taxation Office (ATO) will receive an additional $5.7 million over four years to enforce the ban and enhance screening of foreign investment proposals related to residential property.
Context and Implications:
Housing affordability has become a pressing issue in Australia, with home values in cities like Sydney increasing by nearly 70% over the past decade. The upcoming general election, expected by May, has intensified focus on this issue. While the ban is anticipated to make more homes available to local buyers, some experts argue that foreign investors constitute a small fraction of the market, and broader reforms may be necessary to address the housing crisis effectively.
In addition to the ban, the government is targeting "land banking" by foreign investors—where undeveloped land is held to capitalize on rising prices. An allocation of $8.9 million over four years will bolster the ATO and Treasury's efforts to ensure compliance with development conditions, aiming to expedite the availability of land for housing.
This policy aligns with previous proposals from opposition leaders and reflects a bipartisan acknowledgment of the need for measures to improve housing accessibility for Australians. The effectiveness of the ban will be reviewed before its expiration to determine if an extension is warranted.