On December 10, 2023, the Australian Federal Government announced significant changes to foreign property purchase taxes and vacancy fees. Aiming to address the nation’s housing affordability crisis, the new rules will see a tripling of taxes for foreign buyers acquiring existing homes and a doubling of fees for those leaving properties vacant.
Key changes:
- Foreign residential property tax: Increased from 1.5% to 4.5% of the property value
- Vacancy fee: Doubled from 1% to 2% of the property value annually
- New residential property exemption: Remains unchanged for properties valued below $750,000
- Foreign Investment Review Board (FIRB) approval process: Remains in place for all foreign property purchases
Impact on foreign investors:
The new measures are expected to deter foreign investors from purchasing existing homes in Australia, particularly in popular and expensive markets. This could lead to a decrease in demand and potentially stabilize or even reduce property prices. The increased vacancy fee is also designed to incentivize foreign investors to rent out their properties, increasing housing supply and potentially lowering rental costs.
Government’s rationale:
The government argues that the new measures are necessary to address the growing housing affordability crisis in Australia. Foreign investors have been blamed for driving up property prices, making it difficult for young Australians and low-income earners to enter the housing market. The changes are intended to level the playing field and ensure that Australian residents have a greater opportunity to own their own homes.
Australia Foreign property tax Vacancy fee Housing affordability Foreign Investment Review Board (FIRB) Residential property New residential property exemption Property prices Rental costs Government policy Investment Housing market Supply and demand Young Australians Low-income earners Home ownership Affordability crisis
