Because of the recent influx of overseas interest in the
Australian real estate market, owners and investors need to be
familiar with the Foreign Investment Review Board (FIRB)
requirements. FIRB's role is to review applications by foreign
persons to invest in Australia. Foreign persons include: a person
who does not ordinarily reside in Australia; or a corporation where
a natural person, not ordinarily resident in Australia, holds a
controlling interest or a foreign corporation holds a controlling
interest. Different policies apply to the purchase of commercial
and residential property by foreign persons.
COMMERCIAL REAL ESTATE
With developed commercial real estate, foreign persons must
inform FIRB if they seek to buy an interest that exceeds $54
million in value. If the property is heritage listed, then a $5
million dollar ceiling applies. If the foreign persons are United
States or New Zealand investors, and in the future when the
China-Australia Free Trade Agreement is signed and legislation
passed, Chinese investors, then a ceiling of $1,078 million
applies. Where a foreign investor seeks to buy vacant land for
commercial development, FIRB approval is required, irrespective of
the value of the land, but the applications are generally approved
with conditions imposed.
RESIDENTIAL REAL ESTATE
For residential real estate, FIRB seeks to ensure foreign
investment in residential property increases the supply of
Australia's housing stock. So foreign persons are generally
granted approval by FIRB to acquire a 'new dwelling'. To
constitute a 'new dwelling' the property must be acquired
directly from the developer and not been occupied for the preceding
12 month period. Foreign persons may apply to acquire single vacant
lots but the approval usually requires that person to start
continuous construction of a dwelling on the land within 2 years of
the approval. The same applies where the applicant wishes to
acquire vacant land to develop multiple dwellings.
Foreign persons may also apply to redevelop an existing
dwelling, if the existing dwelling is demolished and multiple
properties constructed on the land. A 'redevelopment' is
not a refurbishment of the existing dwelling. FIRB will only
approve an application to demolish an existing dwelling and replace
it with a single dwelling, if it can be established that the
dwelling has exceeded its economic life as established by a report
from a builder and/or licensed valuer.
Approval for a redevelopment is generally granted provided that
the existing dwelling is not rented out prior to demolition and
that substantial construction of the new dwellings occurs within 24
DEVELOPER ADVANCE FIRB APPROVAL
Developers can also apply to FIRB for a 'blanket'
advance approval to sell new residential dwellings "off the
plan" to foreign persons where 100 or more dwellings are to be
constructed. This process allows the developer to sell up to all of
the dwellings to foreign persons without those purchasers needing
to seek separate FIRB approval.
In those cases, the developer is required to provide the
pre-approval to the foreign purchasers at the time of sale (usually
in the sale contract) and to the market the development both within
Australia and abroad. When applying for the approval, the developer
must attach certain information, including a schedule detailing the
type of dwellings to be constructed (e.g. units or townhouses), the
anticipated selling prices, the marketing plan for the project and
the development approval from the relevant authority.
Hunt & Hunt has considerable experience in FIRB
applications and is able to assist you with any queries about
CHINA-AUSTRALIA FREE TRADE AGREEMENT
Under the China-Australia Free Trade Agreement announced in
November 2014, private Chinese investors will be able to purchase
Australian commercial property up to a value of $1.078 billion
without requiring FIRB approval.
This is a significant easing from the previous $54 million
threshold and brings arrangements for private Chinese investors
into line with US and New Zealand investors.
However, existing arrangements requiring screening of
foreign investors in residential real estate remain. FIRB will also
screen Chinese private investment proposals in agricultural land
over $15 million and agri-business over $53 million.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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