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Government’s Two-Year Ban on Foreign Property Buyers: Impact on Property Investors
February 17, 2025 |
The Australian government has announced a significant policy shift in the property market, imposing a two-year ban on foreign investors purchasing existing Australian homes from April 1, 2025. This measure aligns with a similar proposal made by the opposition last year, reinforcing the growing focus on housing affordability ahead of the upcoming election. At Investax, we understand that such policy changes can have a major impact on property investors. In this article, we have summarised everything you need to know about the new policy and the opposing proposal, along with insights into how these changes may affect the property market and investment strategies.
Key Highlights of the Policy Announcement
- Foreign investors, including foreign-owned companies and temporary residents, will be prohibited from purchasing existing homes in Australia for two years from 1 April 2025, until 31 March 2027.
- The policy aims to address housing affordability concerns, though foreign buyers currently make up only around 2% of the Australian property market.
- Housing Minister Clare O’Neil acknowledged the policy as “an important move,” while also noting that “there is no silver bullet” to solve the housing crisis entirely.
What Is the Opposition Proposing?
As the housing crisis remains a dominant issue, the Liberals have outlined their strategies, focusing on migration policy adjustments and superannuation access for first-home buyers.
Their plan includes:
- Super for Housing: Allowing Australians to withdraw up to $50,000 from their superannuation to purchase their first home, with a requirement to return the funds upon selling the property.
- Reduced Migration Intake: Cutting permanent migration numbers from 185,000 to 140,000 for the next two years, with gradual increases thereafter.
- Adjustments to Student Visa Policies:
- Reducing the number of foreign students at metropolitan universities.
- Increasing student visa fees, including fees for those who change providers.
- Changes to Humanitarian Program: Lowering the refugee and humanitarian intake from 20,000 to 13,750 per year to align with historical averages.
How Will This Impact Property Investors?
For Australian property investors, this policy shift signals potential changes in market dynamics, particularly in high-demand metropolitan areas where foreign investment has traditionally played a significant role.
Impact on Property Values in Established Suburbs
Foreign buyers have historically been active in premium and established suburbs in major cities such as Sydney (e.g., Mosman, Chatswood, and the Eastern Suburbs), Melbourne (e.g., Toorak, South Yarra, and Box Hill), Brisbane (e.g., New Farm, Ascot, and Sunnybank), and Perth (e.g., Applecross, Cottesloe, and Nedlands). These areas have seen strong competition from overseas investors, particularly from China, Hong Kong, and Southeast Asia, driving up property prices. With the two-year ban in place, demand in these suburbs may soften, leading to potential price corrections in the short term.
Investor Considerations in Prime Locations
Property investors who own homes in these established, blue-chip suburbs might experience a temporary dip in property values, especially in the high-end segment, where international buyers often dominate. However, local demand from high-income professionals and families may cushion the impact. Investors should also consider how reduced migration and student inflows could affect rental demand, particularly in inner-city apartment markets that rely heavily on international students and expatriates.
Conclusion
While the ban may create a cooling effect in certain areas, the fundamental housing supply challenges in Australia are unlikely to be resolved quickly. Once the policy expires in two years, foreign buyer demand could return, potentially leading to a rebound in property values. In the meantime, investors should stay informed about evolving market conditions and adapt their strategies to maintain strong rental yields and capital growth.
At Investax, we help property investors navigate changing policies and market conditions with tailored tax and investment strategies. Contact us today to discuss how this policy may impact your portfolio and how to position yourself for long-term success.
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