Foreign property investment ban: gimmick or game changer?

Political posturing over the housing crisis has continued, with the Federal Labor Government undermining the Opposition’s stance on banning foreign property investors from buying established homes by adopting the same policy.

Foreign investors are already barred from buying existing homes but are allowed exceptions for some circumstances, like moving to Australia for work or study.

In 2022/23, foreign investors accounted for just 5,360 residential real estate purchases, of which only a third were existing dwellings.

The Albanese Government this week announced it will ban foreign investors from buying established homes for at least two years and crack down on foreign land banking.

Treasurer Jim Chalmers had described the same policy stance of Opposition Leader Peter Dutton as “unhinged” but has since changed his tune.

“It’s a minor change, but a meaningful one because we know that every effort helps in addressing the housing challenge we’ve inherited.

“We’re banning foreign purchases of established dwellings from 1 April 2025, until 31 March 2027 (and) a review will be undertaken to determine whether it should be extended beyond this point.

“The ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign investors,” Mr Chalmers said.

Julie Kelley, Global Sales and Marketing Manager – SMATS Group of companies, said the changes would be ineffectual in contributing anything relevant to the housing crisis.

“This is little more than a political play of words.

“FIRB essentially restricts foreign buyers from purchasing established properties, although buyers may apply for exemptions.

“Foreign investors account for only a small margin of buyers and the new rules won’t make a scrap of difference.

“This is political nonsense on both sides of politics trying to win votes by playing the anti-foreigner card.”

“The percentage of foreign investors buying property in Australia isn’t huge and they are already paying colossal government fees in excess of the purchase price and stamp duty.”

Supporting Ms Kelley’s assertion about foreign buyers paying much higher entry costs, a local buying a $1.2 million Sydney property would pay the same $48,529 stamp duty as a foreign buyer. But the latter would also incur a whopping $96,0000 surcharge purchaser duty expense.

The ban has been branded irrelevant given the most significant proportion of foreign buying today is actually migrants becoming Australians and buying a place to live.

Ravin Chatlani, Director of Taxation, Australasian Taxation Services, said he didn’t believe it would make a big difference in the market given temporary residents can still buy brand new properties in Australia.

“My thoughts have always been that solving the supply issues and the time it takes to deliver more housing stock is more crucial than measures to restrict demand.”

In addition to the purchasing ban, Mr Chalmers added that the government was cracking down on land banking by foreign investors to free up land to build more homes more quickly.

“Foreign investors are subject to development conditions when they acquire vacant land in Australia to ensure that it is put to productive use within reasonable timeframes.

“The Government is focused on making sure these rules are complied with and identifying any investors who are acquiring vacant land, not developing it while prices rise and then selling it for a profit.”

The ATO and Treasury would be given $8.9 million over four years from 2025–26 and $1.9 million ongoing from 2029–30 to implement an audit program and enhance their compliance approach to target land banking by foreign investors.

WA political parties hacking away at stamp duty

Housing is also a hot political potato at the state level.

With an election looming on 8 March on Western Australia, the sitting Labor Government announced on Tuesday (18 February) that if elected they will raise the stamp duty exemption threshold from $450,000 to $500,000 and raise the concession threshold from $600,000 to $700,000 in Perth Metro and up to $750,000 in regional WA.

The Liberals had previously announced that if elected they will raise the stamp duty exemption thresholds from $450,000 to $550,000 and raise the concession threshold from $600,000 to $700,000.

Labor also announced they will raise the stamp duty threshold for first home buyers on land purchases from $300,000 to $350,000 and give a stamp duty discount up to $450,000.

A further $20.6 million was included in Tuesday’s announcement by Labor to expand stamp duty exemptions for new home purchased off-the-plan and under construction.

The Nationals went early with a policy to completely abolish stamp duty for first home buyers. But they did not announce any changes to exemptions on off-plan and under construction homes.

“Master Builders CEO Matthew Pollock said stamp duties are “amongst the worst taxes a government can levy on homeowners.”

“Every report on stamp duty shows it’s a bad and unfair tax that creates high economic loss, reduces labour mobility, and hits low-income households harder than high income households.

“Stamp duty is a major barrier for many families hoping to get on the property ladder and can make up as much as 20 per cent of the upfront cost of buying a new home.

“Stamp duty is a major financial handbrake on people looking to move.

“It’s a barrier to attracting talent into the state, or for people to move to communities where their skills are in high demand, including the builders and tradies we need to build more homes.”