Can foreign investors buy commercial property in Australia in 2021?
With Australia’s promising property predictions, steady economy, stable government and effective handling of the coronavirus, there’s never been a better time for foreign investors to purchase commercial property in Australia.
Australia’s property market has already showcased strong growth in recent years. Recent industry research showed that foreign investors accounted for 44% of industrial, office and retail commercial property investments in 2020, with many coming from Singapore, Germany and China.
So yes, foreign investors can absolutely set their sights on Australian commercial property in 2021 and beyond. However, there are steps and applications to complete before the journey begins.
What are the rules and regulations?
While foreign investors are welcome to purchase commercial property in Australia, they are restricted to the types of property available for purchase. The reason behind these rules is to ensure that all foreign investments increase housing supply, create new jobs and support the Australian economy.
The main types of commercial properties offshore investors and groups can purchase include new buildings, established dwellings if there’s intention to demolish them and reconstruct a greater amount, and vacant land if construction is planned within four years after purchase.
How to apply for FIRB approval
Foreign investors must first apply to the Foreign Investment Review Board (FIRB) for approval of their purchase before signing any contracts or receiving the rights to purchase their desired property. Alternatively, any contracts signed by Foreign Investors will need to be subject to FIRB approval.
Fortunately, the application process is relatively simple and can be submitted through the ATO website, in accompaniment with a fee. This fee depends on the cost and type of property you’re interested in, such as vacant commercial land, developed land or sensitive businesses. For example, vacant commercial land valued under $10 million will require a $2,000 fee, while properties over $10 million will incur a larger fee.
Foreign investors should complete this form as soon as possible, as you could be waiting up to 40 days before you hear the final decision. This is because 30 days are allocated for the application to be approved or declined, and another 10 days are given for notification.
When reviewing your application, four areas will be looked at – the type and value of the property, whether you’re a private investor or government representative, and if you’re from a Free Trade Agreement (FTA) country, such as Singapore, US, Canada, China, Mexico, Japan, Chile, South Korea or New Zealand.
What consequences do you face?
There are serious penalties for those investors who purchase a property without applying for approval, or for those who fail to pay the accompanying fees, you may face a hefty fine or face three years in Australian jail.
Are there any exemptions?
The foreign investors that do not require FIRB approval include Australian expats living overseas, New Zealand citizens, permanent residents or foreign investors with an Australian spouse that satisfy all other requirements.
What property should you consider?
Remember that what defines a ‘good investment property’ may differ between countries. In Australia, the factors that hold the biggest value include location, demand, property condition, proximity to amenities and foot traffic, and its potential for capital growth.
In Australia, foreign investors frequently target hotels, retail, office and parking spaces, industrial sites, and warehouses. However, in light of market changes from COVID-19, it’s recommended that investors explore properties in the industrial, data, retail supermarket, pharmaceutical and convenience space.
How to team up with an Australian property adviser
Navigating these processes, on top of finding the right property for your investment strategy, can be overwhelming, especially if you’re a first-time offshore investor. That’s why it’s important to team up with an experienced and trusted property adviser on the ground who understands the market and can act on your behalf to get the best possible result.
At Broadway Property, we can help you. Contact us to arrange a time for a video or phone call.
Contact us to discuss your needs. No obligations.
Managing Director, Broadway Property
Director, Broadway Property