_A residential property buyer’s guide on the changes to FIRB applications

If you’re a foreign buyer looking to purchase a residential property in Australia, you’ll probably know about the FIRB application process involved. If you don’t… you’re about to! In amongst the rapid fire of legislation responding to Covid-19 came some subtle changes. So, what were they and how will they affect foreign buyers?

By way of a background, Australia’s Foreign Investment Review Board (FIRB) is the government body that advises the Treasurer on inbound foreign investment. Whilst foreign investment in Australia’s residential property market is encouraged, the aim of FIRB is to direct this investment towards new build developments to support overall housing supply. So, unless you’re an Australian citizen, you will most likely need to apply to FIRB before you can purchase your home.

What’s changed?

In March 2020, the Treasurer of Australia, Josh Frydenberg, made temporary changes in recognition of the fact that the economic impacts of Covid-19 could make Australian assets vulnerable to increased foreign interest. I spoke to Michelle Ciesielski, Head of Residential Research at Knight Frank in Australia about these changes:

“Josh Frydenberg made temporary changes to the foreign investment review framework in order to further protect Australia’s national interests. The changes will remain in place for the duration of the current crisis with no end date given yet. The key changes that affect foreign purchasers are as follows:

• All proposed foreign investments into Australia, subject to the Act, will require approval, regardless of value or the nature of the foreign investor.
• FIRB will extend timeframes for reviewing applications from 30 days to up to six months.

Australia always has been, and is perhaps now even more so, an extremely attractive place to invest money. Whilst the Government was proactive and effective in dealing with the pandemic, its economy was not immune and suffered the same shocks to productivity as the rest of the world.

The purpose of these changes is to protect Australian businesses that have been affected by the economic impacts of Covid-19, leaving them vulnerable. Foreign purchasers of residential property will be largely unaffected except for the increased timescale from 30 days to six months for the application.”

OK, not much has changed for foreign purchasers of residential except for the length of time it takes to get approval. So, what effect has this had on international demand?

Mei Han Wong, Head of International Residential Sales at Knight Frank in Hong Kong specialises in the sale of Australian residential stock and tells us the following:

“The figures across Australia are suggesting that the slowdown in economic activity from the coronavirus has not impacted housing markets in the same way as equities. Australia has been gaining popularity amongst the shrewd buyers who believe in ‘bricks and mortar’ investments and are keeping a keen eye on which countries are performing best at managing the virus.

The recent change in timescales for FIRB applications has only served to speed up the desire of buyers to act now and submit the application as soon as possible. Australia is already showing strong signs of outperforming other markets and the increase to a six-month timeframe for a FIRB application could mean missing out.”

Whilst it’s ultimately up to you how early in the sales process you apply for FIRB approval, it is generally considered the earlier the better. Once you’ve submitted the correct fee and information about yourself, the screening process can get underway.

Upon receipt of a no-objection notification you then have 12 months to act. The correct fee is an important point as on the 1st July 2020 they were adjusted and are now as follows:

Be sure to check out Knight Frank’s Focus On Australia report for an overview on living and studying in Australia and buying residential property. For a more detailed breakdown of costs in each major city refer to Focus On Sydney, Focus On Melbourne and Focus On Brisbane to stay aware of any updates to the process which could affect your property purchase.

Daniel Ward
Associate Director, Residential - Project Marketing
+61 403 556 431
Daniel.Ward@au.knightfrank.com