Student Loophole in Australian Foreign Property Investor Ban

A loophole has been found in the ban on overseas property investors purchasing existing residential property in many Australian states.

Laws brought in by Australian states in recent years have banned foreign investors from purchasing existing residential properties, allowing only off-plan properties and new builds to be bought by overseas property investors. Indeed, New Zealand announced only last week plans to follow suit with a similar ban.

However, the Australian laws offer a loophole whereby temporary residents – such as foreign students – can continue to purchase existing properties, provided they live there permanently and sell the property within three months of leaving Australia.

This loophole is allowing foreign investors to continue purchasing existing residential properties in certain areas through younger family members studying in the country.

A major report by Industry Super Australia (ISA) has found that, despite a recent crackdown, overseas property investors are pushing up prices in hotspot property markets.

The ISA report found a strong link between loan activity and sales of existing properties in Sydney and the number of foreign students coming to Australia.

Foreign student enrolments have increased since 2013, with 343,000 student visas issued in 2016-17. The spike in student numbers coincided with significant Chinese real estate investment, which rose from around $1 billion in 2008-09 to almost $32 billion in 2015-16.

The ISA called for further government action to ban the sale of existing residential properties to all foreigners, regardless of whether or not they are studying in Australia.

However, Australian treasurer, Scott Morrison said the government had already tightened the rules for foreign buyers.

‘In the 2017-18 Federal Budget the government also placed a limit on foreign ownership in new developments; introduced an annual charge on foreign owners who buy residential property and leave it vacant; and tightened the foreign investor tax integrity rules to ­reduce avoidance of capital gains tax on Australian property,’ he said.

It seems the loophole for ‘student overseas property investors’ will continue in Australia.