Ban on foreign investors purchasing entire apartment blocks under Federal Government proposal

EXCLUSIVE: Foreign investors would be banned from buying more than half the homes or apartments in any new development under a plan to help young Australians enter the property market.

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FOREIGN investors would be banned from buying more than half the homes or apartments in any new development under a plan to help young Australians enter the property market.

The Federal Government is preparing to tick off on the proposal to further limit the purchasing power of offshore investors, one of a raft of housing affordability measures to be included in the May Budget.

Before 2009, developers could only sell 50 per cent of new dwellings in any development to foreign buyers as a way of ensuring housing stock was available for local buyers.

The Federal Government is preparing to tick off on the proposal to further limit offshore investors.

But at the height of the Global Financial Crisis, then-assistant treasurer Chris Bowen abolished the foreign limit for off-the-plan homes, allowing overseas investors to buy entire developments provided developers marketed locally as well as abroad.

At the time, Mr Bowen said the changes were about “enhancing flexibility in the market” by removing unnecessary and unproductive regulations.

But with property prices in capital cities jumping by between 10 and 15 per cent last year, the Turnbull Government is under pressure to act, with Treasurer Scott Morrison promising a housing affordability package in the May Budget.

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Treasurer Scott Morrison is promising a housing affordability package in the May Budget. Picture Kym Smith

Latest figures show that first-home buyers’ share of the market dropped from 13.8 per cent to 13.4 per cent in January as investor lending continued to climb.

The proposed change to the foreign investment framework, which is backed by a number of government ministers, is the latest restriction for offshore investors looking to park their money in Australian real estate.

Foreign buyers already face tighter borrowing rules, additional stamp duty charges and are limited to purchasing new or off-the-plan properties.

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Gisella Vollmer believes daughter Tani will never be able to afford a home in Sydney. Picture: Sam Ruttyn

However, the Property Council of Australia warned that further restrictions on overseas buyers could drive away investment and wouldn’t solve the housing affordability crisis.

Chief executive Ken Morrison described the proposal as a “gimmick” and urged the Federal Government to address supply instead.

“There are very few projects where a majority of apartments would be sold to foreigners,” he said. “Foreign investment helps projects start faster and underpins construction, which is what our cities need.

“If we do things that close off housing construction, that risks the economy, housing supply and will make housing affordability worse.”

But the Property Council of Australia warned against restricting overseas buyers. Picture: Jason Sammon

A spokesman for Scott Morrison refused to comment on whether the proposal would form part of the government’s housing affordability package.

“The government has taken consistent and determined action when it comes to foreign investment in land and residential real estate,” the spokesman said.

Labor has vowed to tackle housing affordability by limiting negative gearing to new housing and halving the capital gains discount.