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Foreign Investment Review Board relaxes rules for residential acquisitions

9 April 2009

Developers should be taking steps to benefit from the Foreign Investment Review Board's (FIRB) relaxed guidelines for the sale of new residential real estate to foreigners, according to Allens Arthur Robinson (Allens) Partner Tony Davies.

Following preliminary announcements of the relaxation back in December 2008, the FIRB has now issued its updated policy and the relevant regulations have commenced, which will, among other things, allow developers to sell 100 per cent of dwellings in a new development to foreign persons. The property can be acquired 'off the plan' or after it is completed.

Mr Davies said that one proviso was that the developer must market the dwellings locally, as well as overseas. That is, the dwellings cannot be marketed exclusively overseas.

'Previously in large-scale residential developments, developers would obtain an advanced approval to sell up to 50 per cent of residential product to foreign persons. That 50 per cent limitation will no longer apply for new developments,' Mr Davies said.

'Given the exchange rate movements, the appetite of foreigners to acquire Australian real estate may be enhanced. We are already seeing more foreigners in the market in larger transactions and it is logical that the spin off from that could be an increase in demand for new dwellings.'

Another significant relaxation is that new dwellings can be sold to foreigners, even if they have been occupied for up to 12 months. Mr Davies said that previously if developers held stock in a new development and rented it out to gain cash flow, then that would prevent that property being sold to foreigners. That is no longer the case, but the 12-month period must not be exceeded.

'The one downside of the relaxation is that contracts with foreign buyers must be subject to a FIRB approval being obtained. However FIRB is proposing to streamline the approval process and has already started updating the approval applications.

'The existing prohibition on foreigners acquiring second hand dwellings for investment purposes has not changed.'

Mr Davies said the message is that developers should look to tap into the overseas markets to supplement demand for new dwellings. 

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Notes for editors.

Allens Arthur Robinson has staff in 14 cities and eight countries across the Asia Pacific.