Since the beginning, Australia’s foreign real estate investment has always been affected by foreign domestic policies as a whole. The surge of real estate investment in Australia came side by side with the influx of foreign business investments. After all, when foreign businesses are established, they also need more properties for their operations, as well as for residential needs of their foreign representatives.
Why does Australia need Foreign Business and Real Estate Investments?
For over two centuries now, Australia has relied heavily on foreign investments to balance the shortcomings of the country’s domestic investment needs and savings. It can be said that the country enjoys the success of a higher economic growth and with it a higher standard of living, because of its progressive policies regarding foreign investments. This is something that domestic savings alone cannot achieve.
Foreign Domestic Investment, or FDI as some would call it, is a business investment explored by a firm from one country by operating on another location. Simply put, it is when a foreign company ventures into business by basing the company in Australia. By eliminating the negative factors that their home country imposes and finding another location where the rules are more business-friendly, they present a smoother operation while at the same time boosting the local economy of the current host.
In the case of real estate investments, more and more foreign personalities saw the amicable real estate climate in Australia. The factors that affect a real estate investor’s decision include location, community, lifestyle and the positive projection of real estate investments. All of these look promising in Australia.
How do investments such as these really help a large country like Australia?
In a country like Australia, FDI assures the local economy of a long-term, profit-driven commitment. Meaning, foreign investments in terms of building companies from the ground up requires manpower, resources, and other essentials. And all these companies make good use of the steady resources Australia has. And while doing so, they employ and avail of the services the country has. By bringing in foreign businesses to a vast country like Australia, the local economy is boosted by achieving higher standards in terms of work performance, steadily preparing them for a bigger global platform. By exposing the country in a bigger market, the new companies start to work on a modern business model and utilize the technological and entrepreneurial practices and standards while the old ones are modernised. And this new level of competitiveness helps bring Australia a new image in terms of workforce and growth.
With the influx of demand for real estate properties, the price of such properties also increased. This as a whole increased the value of Australian properties, which has proven to be beneficial for the country.
Government Involvement in Foreign Real Estate Investments
In 1975, the government began to be more involved in foreign domestic investments, stating that the country encourages investments on a basis that the needs and aspirations of Australians are recognized and prioritized. The same was applied towards real estate investments.
At that time, these aspirations were expressed and interpreted to be much more limiting and restricting, more than it was today. And while the restrictive policies attributed to a surge of economic nationalism, it also downplayed the effects of FDI in the country when it caused the masses to think of foreign investments as breach of territory, and foreign employment or hiring as a competition to the locals. This decision resulted to dwindling of investments.
Maintaining the Pre-Establishment Screening until Today
While giving non-limiting statutes and policies to foreign investments, Australia still recognises and considers the effects of said decisions to the hardworking Australians. And this means that every proposal is carefully studied, in accordance to the passed laws, organised. Smaller proposals are usually exempt from the notification, while the bigger ones are given more attention for they are normally the ones that can impact the country and its locals directly.
Most of the concerns raised by locals are those in the nature of real estate. They are concerned that the more foreign investors acquire real estate properties for themselves, fewer properties become available for the locals. And with less property and more demand, the prices will go up until locals themselves can hardly afford to buy their own residential property. To answer this, Australia’s foreign investment policies in the housing segment now aim to encourage housing development that will eventually help locals such as the construction of apartment buildings and town houses.
There are three advantages to having more restrictive measures. First is that it reduces the demand to the housing market. Second is that it increases the supply of housing. When combined, these two advantages create the third advantage: the stabilization of real estate property prices.
The pre-screening governing body is called Foreign Investment Review Board, or FIRB. To learn more about the requirements set by the FIRB on foreign real estate investment, refer to our FIRB approval page.
If you are interested in purchasing real estate in Australia and need assistance, contact us.