On 18 December 2008, Chris Bowen MP, the Assistant Treasurer,
announced changes to the Government's foreign investment
screening arrangements for acquisitions of residential real estate
by foreign persons. The purpose of the changes is described as
streamlining the current notification and administrative
The changes will be implemented progressively as follows:
amendments that simply require changes to policy came into
effect immediately on 18 December 2008; and
amendments requiring changes to the Foreign Acquisitions
and Takeovers Regulations 1989 (the Regulations) will come
into effect after the necessary amendments have been made (expected
late February or early March 2009 – date to be
How does it affect Property Developers?
These changes particularly affect property developers and those
From 18 December 2008 the policy has changed whereby the
existing requirement that only 50% of new dwellings can be sold to
foreign persons on an "off-the-plan" basis has been
removed provided developers market locally as well as overseas.
While the abolition of the 50% limit of sales to foreign persons is
a welcome change, developers should take note of this new
requirement to market overseas. This will no doubt increase costs
to developers in an already challenging market for new residential
development and place an additional administrative burden on
From late February or early March 2009 (date to be advised) - we
are also expecting amendments to the Regulations. Subject to the
amendments of the Regulations, developers will no longer be issued
advance approval for sales of new dwellings to foreign persons
– all non-resident foreign persons must submit individual
applications (or the developers may submit this on behalf of the
Consequently, developers will not be able to enter into a
contract with a foreign person until approval is received unless
the contract is conditional on FIRB approval. Once again, this will
increase uncertainty in the current challenging climate for
developers. Legal issues will also arise as to whether the
developer is making an application as agent for the foreign
purchaser. Final specific details have not been released but
developers should be aware of these upcoming changes to the
Other changes have also been announced. These include:
removing the $300,000 limit on acquisitions of property being
acquired by student visa holders as their principal place of
extending the definition of "new dwelling" which
previously had a requirement that the dwelling had never been
occupied or sold, to now include dwellings that have not been sold
but have been rented out for no more than 12 months; and
accommodation facilities such as resorts, hotels and serviced
apartments will be treated as commercial real estate rather than
residential real estate and therefore notification and approval
will only be required where the value of the property exceeds the
commercial property threshold (this is subject to amendment of the
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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