Assistant Treasurer and Minister for Competition Policy and Consumer Affairs
3 December 2007 - 8 June 2009
Rudd Government Moves to Make Administrative Changes to Foreign Investment Review Process
The Assistant Treasurer, Chris Bowen MP, today announced administrative changes to the Government's foreign investment screening arrangements for acquisitions of residential real estate by foreign persons.
The changes will streamline and update foreign investment screening for residential real estate acquisitions enhancing flexibility in the market, and reducing compliance costs for temporary residents and the construction industry.
Today's changes underscore the Government's commitment to removing unnecessary, unproductive regulation and are in line with the recommendation of the 2006 Banks Taskforce on deregulation which found that the real estate framework "imposes costs on applicants and taxpayers, creates uncertainty, unnecessarily delays transactions, and creates distortions between domestic and foreign investors for little apparent public benefit".
Currently, all temporary residents and non-residents including businesses must notify the Government of their intention to acquire residential real estate, and must comply with post-purchase conditions on its use, development and resale.
The current arrangements have not been updated since 1989 and are consequently poorly targeted. They restrict housing market flexibility and impose unnecessary costs and delay on around 7,500 foreign residents and businesses receiving approval each year. Residential real estate comprises more than 92 per cent of applications received each year by the Foreign Investment Review Board.
The changes will streamline notification arrangements, reducing post purchase conditions on the development of single blocks of vacant land, and aligning the definition of temporary residents with contemporary visa categories.
Restrictions aimed at encouraging the supply of new dwellings and preventing excess demand in the housing market will be retained, for example, the rule requiring non‑residents to purchases new rather than buying existing dwellings.
The changes will be implemented progressively, with all changes in force by early 2009. The Government will monitor the changes to ensure these continue to be in the national interest.
Additional detail is on the Foreign Investment Review Board website at www.firb.gov.au.
Changes to the Foreign Investment Screening Arrangements
- Accommodation facilities such as resorts and hotels will be treated as commercial real estate rather than residential real estate. As a result, rather than all purchases of short term accommodation units being subject to the residential real estate rules, notification will now only be required where the value of the property exceeds the commercial property thresholds ($50 million or $5 million for heritage listed properties).
- Temporary residents will be exempted from notification of proposed acquisitions of established residential real estate for their own residence, new residential real estate and vacant residential land. Further, the restriction preventing student visa holders from purchasing a property valued at over $300,000 will be removed. The rule preventing temporary residents from purchasing more than one established dwelling will be maintained.
- The definition of temporary resident as a person with a visa of at least 12 months duration will also be updated to cover temporary residents with shorter term visas and long term bridging visa holders. Short term visitors, for example, with tourist or certain classes of business visas will continue to not be considered as temporary residents.
- Streamlined administrative procedures will be established to facilitate non‑resident foreign persons notifying and receiving approval for acquisitions of vacant residential land and new dwellings. Streamlined notification arrangements will replace the current administrative system which takes up to 30 days for approval.
- The conditions on acquisitions by non-resident foreign persons of single blocks of vacant residential land will be removed except for a requirement to begin its development within 24 months. Currently development must commence within 12 months (this period is often extended) and at least 50 per cent of the value of the purchase price of the land must be spent on construction of a dwelling.
- The condition that no more than 50 per cent of new dwellings be sold to foreign persons will be abolished provided developers market locally as well as overseas.
- The definition of "new dwelling" will be extended to include those that have not been sold but that have been rented for no more than 12 months. This will provide more flexibility to developers to temporarily rent out units until buyers are found.
- Foreign companies will be allowed to purchase established dwellings for the use of their Australian based staff.