In a significant policy move, the Australian government announced a temporary ban on foreign purchases of established homes from April 1 to March 31, 2027.
This new regulation, supported by both the Labor party and the Coalition, aims to reserve more homes for Australian buyers and curb the effects of foreign land banking.
Despite the intentions behind the new regulations, Megan Lieu from PropTrack suggested the impact on the housing market may be minimal.
Data from the Australian Taxation Office (ATO) showed that foreign purchases made up only 1% of all real estate transactions from July 2022 to June 2023, with a mere third of these involving established homes.
“The ban targets a very small proportion of homes and will likely have a negligible impact on overall housing supply and affordability,” Lieu said. “In order to address the major housing shortage we’re currently undergoing, we need to focus more on initiatives that impact supply on a larger scale.”
The government acknowledged that the fundamental issue at hand is the national housing shortage, exacerbated by a 28% shortfall in new home construction compared to population growth between June 2023 and June 2024.
Some regions like Queensland and Western Australia are experiencing even greater deficits.
To truly address the shortage, there is a consensus that the solution lies in accelerating the construction of new homes and improving compliance with development conditions for foreign-owned vacant land.
The Albanese government, alongside implementing the temporary ban, is enhancing the enforcement of rules around foreign investment.
With a budget of $5.7 million allocated for the period 2025–26, ATO will strengthen its compliance team to ensure that the regulations are adhered to.
A comprehensive audit of foreign investment in vacant residential land is also planned to discourage speculative land banking that delays development.
Additionally, exceptions under the new ban will be tightly controlled, focusing on investments that significantly increase or support the availability of housing supply, including for schemes like the Pacific Australia Labour Mobility (PALM).
This policy has also become a point of contention between the major political parties.
The Labor government contrasts its proactive stance with the Coalition’s proposed cuts to housing funding, highlighting a clear divide in approaches to solving the housing crisis.
As the ban’s initial period nears its end in March 2027, a review will determine its effectiveness and the potential for an extension.
Read the PropTrack insights for more information. To learn more about the temporary ban on foreign purchases, visit the ATO and Treasury announcements.
