The Rudd government announced last week it was revising the foreign investment approval requirements for the acquisition of residential property by foreign persons. These announcements take effect between 18 December 2008 (through policy changes) and early 2009 (where changes to the regulations are required).

How these changes will affect developers

In many ways these announcements ease the regulatory requirements on foreign persons, particularly temporary Australian residents, to obtain approval to acquire residential land. However, of particular relevance to property developers, advanced, off the plan pre-approvals to sell up to 50% of the residences in a development to foreign persons will no longer be available. Advanced, off the plan pre-approvals issued prior to 18 December 2008 will still apply.

Another significant change is the characterisation of accommodation facilities such as hotels and resorts as commercial (rather than residential) land. This means the acquisition of such facilities, or individual units within them, valued at less than $50 million (for non-heritage listed property) by foreign persons will not require Foreign Investment Review Board (FIRB) approval. For this exemption to apply, the unit or facility must retain its commercial (i.e. short term rental) character.

How these changes will affect temporary residents

Under the changes, temporary residents, which includes all foreign persons living in Australia on a valid visa, will be able to buy:

• one second hand dwelling to be their principal place of residence
• any number of new dwellings (which now include any residential dwelling that has been rented out for less than 12 months), and
• single blocks of vacant residential land

without prior approval from the FIRB. This also applies where the temporary resident acquires the property through their wholly owned trust or Australian incorporated company.

How these changes will affect other foreign persons

Other foreign persons will need prior approval for any acquisitions of interests in Australian urban land, however FIRB will usually grant approval for the acquisition of new dwellings off the plan, provided developers market both locally and overseas. Where approval is obtained by the foreign purchaser, there is no restriction on the number of units in a development that may be acquired by foreign persons.

For further assistance or enquiries please contact:

Property Group

Ian Hazzard on 07 3233 8976
Mark Foy on 07 3233 834
Cherie Leatham on 07 3233 8867

Finance Group

Peter Stewart on 07 3233 8942

Commercial Group

Duncan Bedford on 07 3233 8867.