In a bid to bolster Australia’s housing stock and encourage investment in rental properties, the Albanese Government has unveiled a series of legislative changes aimed at recalibrating the foreign investment framework. The proposed adjustments, encapsulated in the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2024, seek to realign foreign investment to prioritise local homeowners while fostering the expansion of affordable housing options across the country.
In a Press release, Julie Collins (pictured), Minister for Housing, Homelessness, and Small Business, alongside Treasurer Jim Chalmers, outlined the implications of these new laws. Higher fees for the acquisition of established homes and augmented penalties for vacant properties will be imposed on foreign investors. This strategic move aims to dissuade speculation and ensure that foreign investment in residential real estate is congruent with Australia’s housing objectives. Notably, application fees for foreign investment in Build-to-Rent projects will be reduced to facilitate the creation of new rental units nationwide.
The adjustments, outlined in the Mid-Year Economic and Fiscal Outlook, include a significant increase in fees for the purchase of established homes and a corresponding elevation in vacancy penalties for foreign-owned dwellings acquired since May 9, 2017. These measures, along with other initiatives like the Commonwealth Rent Assistance expansion and the Housing Australia Future Fund, highlight the government’s approach to addressing housing affordability and the supply crisis.
“Foreign nationals are generally barred from buying existing property, but can do so in very limited circumstances such as when they come to live here for work or study,” it was stated. “When they leave the country, they are required to sell the property if they have not become a permanent resident.”
The Property Council of Australia welcomed the introduction of legislation, noting in a statement that this will boost investment in new rental supply. Matthew Kandelaars, the group executive policy and advocacy at the Property Council of Australia, emphasized the critical role of Build-to-Rent housing in addressing the nation’s housing needs, citing its potential to deliver 150,000 new rental homes over the next decade.
“In a competitive global capital market, promoting foreign investment into much-needed new housing makes sense,” said Kandelaars in the statement. “International capital, including Australian superannuation funds, is backing build-to-rent housing projects abroad as we speak. We need to redirect this capital to support the construction of new Australian homes.”
However, challenges persist, particularly regarding the disparity in fees faced by investors in Build-to-Rent properties compared to other asset classes. For example, fees can reach as much as $1.1 million for a $50 million residential deal, while only $13,200 for a commercial deal.
While the government’s decision to reduce the managed investment trust withholding tax rate is welcomed, concerns linger regarding its impact on the affordability of rental housing. Research from EY suggests that further tax adjustments, particularly lowering the rate to 10% for projects incorporating affordable housing components, could expedite the construction of 10,000 affordable homes and secure 150,000 rental units over the next decade.
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