Changes to Australia's foreign investment review policy - What are the benefits for the Real Estate market?

During 2008 and 2009, the Federal Government announced a number of changes to its foreign investment review policy that should provide tangible benefits to both Australian and foreign investors. The changes simplify the approval processes and broaden the pool of potential purchasers who can invest in Australian real estate. It is hoped this will assist in making more development projects feasible and in improving the prospects of raising finance.

The changes deal with the following:

• Removing restrictions on the acquisition of new and second-hand residential dwellings by temporary residents and foreign companies.
• Removing minimum expenditure requirements and increasing development time frames to encourage the development of real estate by foreign investors.
• Reducing restrictions on the sale of new residential dwellings to foreign investors to encourage the development of residential real estate by Australian interests and providing more flexibility in the housing market.
• Changing the way accommodation facilities (such as resorts and hotels) are dealt with – ie treating them as commercial real estate, not residential real estate to encourage investment by foreign investors.

These changes affect the approval processes and the general operation of the Foreign Investment Review Board, the advisory body of the Australian Government that examines direct investment in Australian assets and businesses by foreign investors (which includes Australian companies in which a foreign person or company holds a substantial interest).

A summary of the changes is provided in this Update. All changes are effective as of 31 March 2009.