How to invest in property as a non-resident | Finder (2024)

Australian property has been a popular destination for foreign investors for many years. But buying property as a foreign buyer comes with extra rules and regulations that you'll need to follow. The Foreign Investment Review Board (FIRB) oversees foreign property purchases and has its own application process.

Can foreigners buy property in Australia?

Yes. Non-Australians can buy property in Australia as investments. In Australia, foreign property purchases are regulated by FIRB (meaning foreign buyers must apply for approval through the FIRB before buying residential real estate) and there are limitations in place.

According to the FIRB website:

"The Government's policy is to channel foreign investment into new dwellings, as this creates additional jobs in the construction industry and helps support economic growth. It can also increase government revenues, in the form of stamp duties and other taxes."

In other words, Australia's foreign property investment rules encourage foreign buyers to purchase new buildings and therefore stimulate the construction of new housing.

Purchasing new vs established dwellings

It's much easier for foreign investors to buy new buildings or vacant land (provided you construct a property on the land) than it is to buy an established property.

You will need to apply through FIRB, but there's much less scrutiny if you buy:

• New buildings. There are generally no conditions attached when purchasing a new dwelling.
• Vacant land. If buying vacant land, the main condition is that you need to complete construction of a dwelling on the land within 4 years. You can't just buy vacant land and hold it indefinitely.

It's a different story with established dwellings (buildings that are not new). Foreign investors can't get approval to buy established dwellings except in the following cases:

• Buying a home to live in as a temporary resident. You have to sell it once you leave, unless you become a permanent resident or citizen.
• Buying an established dwelling to demolish it and develop more dwellings. Because the aim of the foreign investment regime is to encourage new housing construction, you can apply to purchase an existing dwelling if you're planning to demolish and build new housing. The condition is that you must build and supply additional new housing, ie. replace 1 house with 3 townhouses.

How does the FIRB application process work?

Before you apply for approval to purchase an investment property, it's recommended that you obtain expert legal advice to make sure you understand and comply with all the necessary legal requirements. Then you can follow the steps below to apply for foreign investment approval:

1. Check the FIRB website to read the guidance and check if you need FIRB approval.
2. Visit the ATO website and click on "Start your application".
3. Fill out the application form with your contact details, passport, visa documents and any previous FIRB application reference numbers.
4. Provide the address and title details of the property you wish to purchase.
5. Read and sign the declaration.
6. Submit the application and pay the relevant fee.
7. A decision on your application is usually made within 30 days and you will be informed of that decision within 10 days.

Application fees:

Source: Foreign Investment Review Board. Details are correct at time of publication.

You must obtain approval from the FIRB before you can apply for a home loan with an Australian lender. Fees are payable at the time of lodging your application.

The maximum fee you'll pay on a residential project worth $40m or more is $503,000.

Penalties for breaking rules on foreign investment

There are serious potential penalties for breaching Australia's rules on foreign investment. Acquiring property without FIRB approval can involve fines of up to $157,000 or up to 3 years in prison.

There are higher penalties for foreign companies breaching these rules.

Home loan restrictions

If you need a home loan to cover your purchasing costs it's important to compare loans and lenders carefully. Many Australian lenders impose tighter lending criteria on foreign buyers. This can include:

• A lower loan-to-value ratio (LVR). LVR refers to your deposit size relative to the price of the property. You may need a larger deposit (around 30-40%) to qualify for a mortgage.
• A higher interest rate. A lender may only offer a loan for your investment with a higher interest rate than the lowest rates on the market.
• Restrictions on foreign income. Some lenders won't accept loan applications from temporary residents unless they earn an income in Australia.

If you want to get a home loan for your foreign investment you should approach lenders and ask directly about borrowing as a foreign investor. You could also focus on international banks that operate in Australia, such as HSBC or Citi.

Speaking to a local mortgage broker is also a good idea.

Finally, it’s also worth remembering that there are tax implications for investing in Australian property. Any rental income you receive from your investment will need to be declared on an Australian tax return. You will need to pay Capital Gains Tax on any profit you make when selling the property.

What if I’m an Australian resident living abroad?

If you’re an Australian resident temporarily living overseas and you want to buy an investment property in Australia, the good news is that the strict foreign investment laws don’t affect you. You are exempt from needing FIRB approval in a range of circ*mstances, including if you:

• Are an Australian or New Zealand citizen.
• Hold an Australian permanent resident visa.
• Have a spouse who fits into either of the above categories and the property is being purchased in both names as joint tenants.

However, you’ll need to check whether lending restrictions imposed by the banks will have an impact on your ability to qualify for a home loan. This will depend on your residency status and the lender with which you apply for a loan.

Using foreign income to invest in Australian property is a complex and confusing topic. So it’s recommended that you seek legal and taxation advice to make sure you satisfy all regulatory requirements.

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