Foreign Investors Double Down on Australian Assets

Investment in commercial Australian properties nearly doubled last year despite the introduction of the “most significant” changes to Foreign Investment Review Board policies. 

There were 862 commercial investment proposals worth $82 billion in 2020-2021, up on the $43.2 billion and 422 proposals of the previous financial year.

The majority of investments were made in Victoria and NSW, according to the FIRB annual report. 

The release of the report came as the first penalty order for breaches of the new rules was issued by the Federal Court of Australia, backed with $250,000 in fines.

The FIRB annual report showed despite this growth in commercial properties, the overall number of applications declined while the value of investment increased 19 per cent to $223 billion.

Residential applications dropped 37.8 per cent, largely due to changes in application requirements, restrictions and costs.

The policy changes put a temporary zero-dollar threshold on purchases during the pandemic, however, buyers only needed a single approval for themselves, not for each property.

The changes to the Foreign Acquisition and Takeover Act, including the removal of the zero-dollar threshold were implemented on January 1, 2021, which also gave greater powers to the government to reject applications if it was a matter of national security.

Top foreign investors in Australia

^{^Source: FIRB annual report 2020-21}

Juwai IQI co-founder Daniel Ho said the reform was very welcome and the latest results show the country remains very attractive to foreign buyers.

“Overseas demand for residential real estate is down because of Covid and related restrictions,” Ho said.

“It is also down because it is now harder to finance a purchase in Australia, foreign buyer stamp duties are still high, and foreign investment application fees are now higher than before.

“The high costs are balanced out by its strong educational offering, lifestyle benefits, proximity to Asia, and dependable markets and economy. 

“The fact that total approved for an investment increased 19 per cent despite the pandemic demonstrates how good Australia’s brand is.”

FIRB acting chair Cheryl Edwardes said they worked hard to ensure the policy change transition was smooth and to build confidence with investors during the pandemic.

“The board participated in a range of outreach activities with investors and their representatives to encourage two–way dialogue and increase information sharing to build confidence during these uncertain times and provide insights which informed its advice to the government,” Edwardes said.

“As we look towards the future, the board continues to support Australia’s post-Covid economic recovery including through encouraging an open and ongoing communication with investors.

“This includes an increase in foreign investment inflows across multiple sectors including commercial real estate, manufacturing, gas and electricity and services during the reporting period.”

The first penalty order was made after a foreign investor, Vijay Balasubramaniyan, purchased four properties without FIRB permission and simultaneously owned two established properties.

Because of this, the buyer faced civil penalties to enable the government to recapture capital gain or 25 per cent of value of the property, whichever was greater.