Due to the fact that it is increasingly difficult to invest in property in China due to the restrictions on the amount of property that can be purchased, Chinese Investors are looking elsewhere to invest in real estate and Sydney is a favourite. This is the same throughout Asia and Russia. In Australian foreign investment in real estate is regulated by the Foreign Investment Review Board (FIRB) which is part of the Commonwealth Department of Treasury. The Foreign Acquisitions and Takeovers Act 1975 (Cth) (FATA) regulates non-residents acquiring interests in Australian assets, including real estate.
Residential Real Estate
An approval is required for non Australian residents to purchase residential real estate unless:
- the investor is purchasing a new dwelling(s) from the developer, where the developer has pre-approval to sell the dwellings to foreign persons.
If the developer has this approval no approval from the FIRB is required for a real estate purchase by a non-resident as the purchase is deemed to be non-regulated.
New dwellings which are purchased ‘off the plan’ before construction commences, during the construction phase or after construction is complete are normally approved if the dwellings:
1. have not previously been sold (that is, they are purchased from the developer); and
2. have not been occupied for more than 12 months.
There is no limit on the number of such dwellings in a new development which may be sold to foreign persons, provided that the developer markets the dwellings within Australia as well as overseas. This category of purchase includes dwellings that are part of extensively refurbished buildings where the use of the building has changed from non-residential (for example, office or warehouse) to residential. It does not include established residential real estate that has been refurbished or renovated. A property purchased under this category may be rented out, sold to Australian purchasers or other eligible purchasers, or kept for the foreign investor’s own use.
Once the property has been purchased, it is second-hand real estate and is subject to the restrictions applying to that category.
A foreign investor can generally purchase vacant land for residential development subject to development condition(s) imposed under the Foreign Acquisitions and Takeovers Act 1975. The purchase of single blocks of vacant land (that is, land which is zoned to permit the construction of only one residential dwelling per block of land) to build a single residential dwelling on each block are normally approved subject to the following condition:
- continuous substantial construction must commence within 24 months of the purchase.
The purchase of other vacant land (not single blocks) for the purpose of building multiple residential dwellings are normally approved subject to the following conditions:
- continuous substantial construction must commence within 24 months of the purchase; and
- at least 50 per cent of the purchase cost or the current market value of the land
(Whichever is higher) must be spent on developing the land. Provided these conditions are satisfied, properties acquired under this category may be rented out, sold to Australian purchasers or other eligible purchasers, or kept for the foreign investor’s own use.
Generally no approval from the FIRB is required for foreign investors to purchase commercial property if:
1. They are acquiring an interest in developed commercial property valued below:
- $50 million generally;
- $5 million for heritage listed properties; or
- $1005 million for US investors;
2. They are acquiring an interest in developed commercial property where the property is to be used immediately and in its present state for industrial or non residential commercial purposes. The acquisition must be wholly incidental to the purchaser’s proposed or existing business activities.
Sydney is currently an excellent place to invest as real estate prices have fallen substantially in many areas over recent years and rental returns are increasing.