Foreign Investment Ban in Australia: How It Could Impact You

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The Australian government has introduced a two-year ban on foreign investors purchasing established homes in an effort to tackle housing affordability and curb land banking (a practice where investors purchase land or properties and hold onto them without developing or using them, often to profit from rising prices).

While policymakers hope this move will free up more housing for local buyers, it raises important questions about its real impact on the property market. Will this restriction ease competition and lower prices, or could it have unintended consequences for investors and homeowners? Let’s break it down.

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Why the Government Is Banning Foreign Investors

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The Albanese government has introduced a temporary two-year ban on foreign investors purchasing established properties (homes or buildings that have already been built and previously owned or occupied) starting April 1, 2025, through March 31, 2027. A review will determine whether this ban will be extended further.

The primary reasons for this ban include:

1. Increasing Housing Availability – The government wants to ensure more homes are available for Australians rather than foreign investors.
2. Preventing Land Banking – Some foreign investors purchase land but do not develop it, leading to artificial price increases and fewer available homes.
3. Strengthening Compliance Measures – An additional $5.7 million will be allocated over four years to the Australian Taxation Office (ATO) for enforcement and auditing foreign investment.

Although foreign investors were already limited in buying established properties, this new measure ensures a complete ban during the two-year period, with only a few exceptions.

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Who Will Be Affected?

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As mentioned above, foreign investors will no longer be able to purchase established dwellings in Australia. Exceptions will only apply in cases where investments:

• Significantly increase housing supply
• Support housing availability
• Fall under the Pacific Australia Labour Mobility Scheme (The Pacific Australia Labour Mobility (PALM) Scheme allows workers from Pacific Island nations and Timor-Leste to take up temporary jobs in Australia, mainly in agriculture and essential industries. Under the new property rules, foreign investors may still be allowed to invest in housing that supports accommodation for PALM Scheme workers)

Additionally, foreign investors who have already acquired vacant land or plan to do so will face heightened scrutiny to ensure they comply with development conditions and are not simply holding onto land without developing it.

The government is also allocating $8.9 million over four years for an audit program targeting foreign investors who engage in land banking, a practice where investors purchase land or properties and hold onto them without developing or using them, often to profit from rising prices.

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How Will This Impact You?

Many Australians are wondering how much this ban will actually change the housing market. The data suggests the impact will be minimal.

A recent report by Macro Business, found that only 3.9% of all established property purchases were made by foreign investors. This number peaked at around 10% in 2014-2015, but today, it’s a fraction of the total market.

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Additionally, in the 2022-23 financial year, only 1,787 out of 730,000 total home sales (or 0.24%) were made by foreign investors buying established homes.

The bottom line: This ban is unlikely to significantly impact housing prices or increase home availability for Australians.

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Interestingly, the government did not introduce restrictions on off-the-plan developments and new builds, despite many foreign investors targeting these properties.

Historically, foreign investment in new housing has been much higher than in established properties. Many off-the-plan apartments and house-and-land packages are sold to overseas buyers through international marketing campaigns.

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How Will This Affect Property Prices?

While the ban could slightly reduce demand for established homes, the bigger factors affecting property prices are:

• Local investor activity
• Interest rate changes
• Housing supply shortages
• Government lending policies

The Australian government is also relaxing lending restrictions by removing student debt from mortgage serviceability calculations, which will increase borrowing capacity for many Australians.

For example, a homebuyer earning $100,000 per year could borrow $56,000 more, while someone earning $125,000 per year could increase their borrowing capacity by $95,000.

Even though foreign investment in established properties will decrease, increased borrowing power for Australians could balance out the demand, keeping prices stable or even increasing them in some areas.

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Should You Still Invest in Property?

While the government's temporary ban on foreign buyers makes headlines, its actual impact on the property market will be minimal. The bigger issue remains housing supply shortages and lending policy changes that drive local buyer demand.

If you're a property investor or homebuyer, the ban on foreign investment shouldn’t change your long-term strategy. What you should focus on instead is:

• Buying in high-growth areas with strong fundamentals
• Avoiding off-the-plan developments that often underperform
• Looking at established homes with proven capital growth

If you're looking to make the right moves in the Australian property market, working with a team of experts is the best way to stay ahead. Want to build a scalable, high-growth portfolio? Book a FREE strategy call with our team at Search Property today!

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