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Can foreigners buy commercial property in Australia? Here is our guide on how you can how can you get in on the action.
Foreigners typically come to Australia for its kangaroos and koalas, its majestic landscapes or to have a taste of the infamous shrimp on the barbie. But for foreign investors, the Land Down Under is also an attractive investment location due to the solid performance of its housing market.
But it’s not just residential properties that are attracting foreign real estate buyers —commercial properties have also piqued the interest of savvy property investors from overseas. In the past few years, foreign investors’ demand for commercial properties in Australia has been strongly growing, evidenced by their increasing share of transaction values.
According to the 2019 Foreign Investment Review Board’s (FIRB) annual report, total investment in commercial and residential real estate by foreign buyers reached up to $87.8 billion. Commercial property made up $73 billion of this, while residential property made up the remaining $14.8 billion.
So if you’re a non-resident, how can you get in on the action?
In this article, we’ll look at how foreigners can invest in Australia’s commercial property markets, the application process and the costs involved.
Can foreigners buy commercial property in Australia?
Foreigners can buy both residential and commercial investment properties in Australia. However, investing in Australia also means foreign buyers need to play by the Australian government rules.
While foreign investors are welcome to buy commercial real estate in the country, there are rules and regulations that need to be followed before they can purchase.
According to the law, foreigners or those designated as non-residents, may need to to the FIRB for approval to purchase their desired investment property. These rules are in place to ensure that all foreign investments boost housing supply, create new jobs and support the country’s economy.
The main types of commercial properties foreign investors can purchase are vacant and developed.
When reviewing your application, the FIRB will review four aspects: 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. We’ll discuss these aspects more in detail.
The type and value of the property you are planning to purchase
The FIRB sets out certain “monetary thresholds” that determine whether you need to notify the governing body of your proposed acquisition. The value threshold varies if you purchase vacant commercial land, developed commercial land, developed commercial land, sensitive or non-sensitive and agribusinesses, to name a few.
For example, for so-called “developed commercial land” or non-vacant land, you will only be required to seek FIRB approval if the value of the purchase is $252 million or higher.
Meanwhile, the threshold differs for those identified as ‘sensitive developed commercial land’. Commercial property that is involved in any of the activities that are considered to be sensitive to Australia’s national interests will need to seek approval from FIRB of their proposed purchase if the acquisition value is $55 million or more.
For vacant commercial land, government approval is needed no matter the value of the land. This is why the monetary threshold for all investors is $0.
As with any investments, be sure to do due diligence beforehand. For more information about the different types of properties and their respective thresholds, read FIRB’s guidance notes.
FTA partner countries
Foreign investors from countries that currently have Free Trade Agreements (FTA) with Australia enjoy higher monetary thresholds, which can range up to $1154 million when purchasing a commercial property.
Australia’s FTA partner countries include Canada, Chile, China, Japan, Mexico, New Zealand, Singapore, South Korea and the United States.
Private investors from other countries have a lower threshold and need to apply for FIRB approval for properties valued up to $260 million.
We recommend you to check FIRB’s website where you can find a detailed chart showing the different thresholds for each property type for FTA partners.
Representing a government
If you are an investor representing foreign government bodies, you will need to apply for FIRB approval, no matter what the value of the property is. Thus, the threshold starts from $0.
What are the exemptions?
If you are an Australian citizen living overseas, the rules around foreign investment probably won’t apply to you, with a number of other groups also exempt.
Other foreign investors that do not require FIRB approval include Australian citizens, New Zealand citizens, Australian permanent visa holders,
What is the FIRB application process?
Foreign investors must first seek approval of their purchase from the FIRB before closing any transaction, signing an unconditional contract, or receiving the rights to purchase their desired property.
The good news is that the application process is relatively simple. Here is the application process for approval from the FIRB:
Step 1: Go to firb.gov.au website and click ‘Apply now through the FIRB Application Portal’
Step 2: Fill out the form provided with all the needed personal information, passports and visa details.
Step 3: Provide information of the property you wish to buy.
Step 4: Sign the form and submit the application, paying the appropriate fee. The fee depends on the cost and type of property you’re interested in.
Step 5: Wait for the decision on your application.
If you already have your eyes set on a commercial property, it’s advisable to complete this form as soon as possible. This is because applications could take up to 40 days before you hear the final decision. There is a statutory period of 30 days allocated for the application to be approved or declined and a further 10 days is given for notification.
What are the penalties for not applying?
There are serious penalties waiting for foreign investors who buy a commercial property without applying for approval or those who fail to pay the accompanying fees for the application. Failing to comply with the regulations set by the FIRB means you may face a hefty fine or face up to three years in an Australian jail.
Things to consider before investing in Australia’s property market as a foreigner
If you are a foreigner looking to buy a property in Australia, it’s important to remember that what makes a good property can 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 gains.
For example, location is arguably the number one priority for Aussie investors, with proximity to a CBD or lifestyle centres certain to be attractive to a wide range of people. Meanwhile, an investment property’s proximity to amenities like shops, restaurants, schools, hospitals, and public transport are also big drawcards.
It’s also important to note that the economic and social trends, as well as geopolitical factors, can also impact the movement of commercial property markets in Australia.
Clueless where to start? You can begin your journey by reading our article on the top 10 things to consider before buying a commercial property.
Meanwhile, if you’re looking for a top source for the latest property market reports, insights, news and useful tips and strategies from experts in the Australian real estate market, visit Smart Property Investment’s News Section. You can also get a profile of every suburb across Australian states and territories are also available through our Suburb Search tool.