Australia has passed a law banning the purchase of existing homes by foreigners in an effort to boost housing supply. The two-year ban, imposed by the Australian government on Sunday, will come into effect on 1 April, and is expected to free up some 1,800 properties per year for local buyers.
The country’s housing crisis has become a key economic issue, and with frustrations peaking in 2024, dissatisfaction is likely to be a key focus of the country’s general elections, expected to take place in May. The National Housing Finance and Investment Corporation (NHFIC) has projected there will be a shortage of around 106,000 homes by 2027, signalling the growing demand for housing.
In a statement, Australian treasurer Jim Chalmers, said that the crackdown on foreign land banking was aimed at easing the pressure on the Australian housing market as more homes are built.
“These initiatives are a small but important part of our already big and broad housing agenda which is focused on boosting supply and helping more people into homes,” Chalmers said.
“It’s a minor change, but a meaningful one because we know that every effort helps in addressing the housing challenge we’ve inherited.”
“The ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign investors,” Chalmers added.
A review will take place after 31 March 2027, in order to determine whether the ban should be extended further.
The policy does not apply to new builds, but will prohibit purchases of existing homes from any foreign investors – including temporary residents, such as international students, and foreign-owned companies. The ban will extend to both categories of buyers unless an exemption applies. Exemptions include investments that significantly increase housing supply or support to availability of housing supply.
“Until now, foreign investors have generally been barred from buying existing property except in limited circumstances, such as when they come to live here for work or study,” Chalmers said.
“We will also bolster the Australian Taxation Office’s (ATO) foreign investment compliance team to enforce the ban and enhance screening of foreign investment proposals relating to residential property by providing $5.7 million over four years from 2025-26,” Chalmers said.
“This will ensure that the ban and exemptions are complied with, and tough enforcement action is taken for any non-compliance.”
In addition to the temporary ban on foreign purchases of established dwellings, the government is also taking steps to target land banking – buying land as an investment, holding it for use in the future, and making no specific plans for the land development – by foreign investors.
“We’re cracking down on land banking by foreign investors to free up land to build more homes more quickly,” Chalmers added.
COULD IRELAND DO THE SAME?
Banning individual foreign buyers from purchasing homes as a means of increasing housing availability has emerged as a potential way of alleviating the housing crisis.
Whilst housing availability and affordability is also a key issue in Ireland, a ban on EU citizens buying homes here would likely not be possible due to Ireland’s membership of the EU. Citizens of the EU have a right to live in any other EU country, and have the same rights as citizens of that country when it comes to buying or selling a property. Such rights apply to homes used as a primary residence, as well as second (or holiday) homes, and office properties.
However, a growing number of EU countries have taken specific steps to grapple with housing deficits. Portugal recently passed a Bill meaning that non-resident citizens from countries outside of the European Union, including the UK, would face a large tax if they were to buy a home in the country. Meanwhile, in some parts of Austria, including in the capital Vienna, people from outside the EU can only buy property under certain criteria, including if the prospective buyer has a residency permit.
In Malta, EU citizens are required to have lived in the country for five years to buy property – unless they obtain a special permit from the Maltese government. In recent months, Spain’s Prime Minister also announced plans to increase tax bills for non-resident citizens from countries outside the European Union seeking to purchase property, while France has proposed similar measures.
Mairéad McGuinness, EU commissioner for financial services, previously responded to a parliamentary question on the issue, stating that there were rules against a country imposing restrictions on “non-resident EU nationals” buying homes.
She added that any exceptions to those restrictions would need to be justified “on grounds of public policy or public security, or by overriding reasons in the public interest,” and that such restrictions would have to be “proportionate.”
Former Housing Minister Darragh O’Brien, when he was Fianna’s Fáil’s housing spokesman back in 2018, called on the then minister for housing, Eoghan Murphy, to assess the level of non-residents or foreign firms buying homes in Ireland.
However, as Housing Minister, his view appeared to have shifted. A spokesperson for Mr O’Brien told The Irish Times last year that banning individual foreign purchases of properties would be open to “significant legal challenge.”
According to Mr O’Brien in 2024, some €13.6 billion of investment is needed annually to meet the average of 33,000 new homes per year, and more than €11 billion of this is required from private sources.
“Without this private funding, activity in the housing market would be much reduced, and the pressure already facing renters and prospective homeowners would increase significantly,” he said at the time.