What the Foreign Buyer Ban Means for Melbourne Sellers 2025

International property buyers have played a notable role in Melbourne's real estate market, often purchasing homes and land as investments. However, their activity has raised concerns about housing affordability for locals. In response, the Albanese Government has introduced a temporary ban on foreign investors buying established homes and a crackdown on land banking. These measures, effective from 1 April 2025 to 31 March 2027, aim to ease pressure on the housing market and increase supply for Australians.

Who Are International Property Buyers?

International property buyers are individuals or entities from outside Australia who invest in Melbourne's real estate. They are drawn to the city for its strong economy, cultural appeal, and reputation as a desirable place to live. Typically, these buyers include foreign investors, temporary residents, and foreign owned companies seeking to capitalise on property value growth. Until now, they could buy established homes under limited circumstances, such as when living in Australia for work or study. However, their purchases have often been blamed for pushing up prices, making it harder for local residents to afford homes.

New Government Regulations

The Albanese Government is taking decisive action to address these challenges:

Ban on Established Homes

From 1 April 2025 to 31 March 2027, foreign investors will be barred from purchasing existing dwellings in Australia, including Melbourne. This temporary two-year ban aims to reserve established homes for Australians. A review will determine if the ban extends beyond 2027.

Key Measures

• Exceptions: Limited exemptions apply, such as investments that significantly boost housing supply or support schemes like the Pacific Australia Labour Mobility (PALM) programme.
• Enhanced Enforcement: The Australian Taxation Office (ATO) will receive $5.7 million over four years from 2025–26 to strengthen compliance teams, ensuring the ban is enforced and exceptions are followed.

Targeting Land Banking

The government is also addressing land banking, where foreign investors buy vacant land but delay development to sell later at a profit. This practice delays housing construction and violates existing rules. To tackle it:

• Funding for Compliance: The ATO and Treasury will get $8.9 million over four years, plus $1.9 million ongoing from 2029–30, to audit and enforce development conditions on vacant land.
• Increased Scrutiny: Foreign investors holding or seeking vacant land will face stricter oversight to ensure timely development.

These steps are part of the government's $32 billion Homes for Australia plan to boost housing supply and affordability.

Impact on Melbourne's Property Market

The new regulations will reshape Melbourne's property landscape. By banning foreign purchases of established homes, competition for existing properties should decrease, potentially stabilising or lowering prices in sought after areas like the inner suburbs. This could make homeownership more achievable for Melbourne residents.

However, the focus on boosting supply means foreign investors can still participate in new housing projects. Investments that lead to additional homes will be exempt, encouraging development rather than speculation on existing stock. This shift could stimulate construction in growing suburbs, balancing the market while addressing local needs.

Benefits and Challenges for Local Sellers

Benefits

• Pre-Ban Sales: Until 31 March 2025, sellers can still attract foreign buyers willing to pay premium prices for established homes, potentially speeding up sales and maximising returns.
• New Development Opportunities: Post-ban, foreign investment in new builds could benefit sellers involved in development projects, as demand shifts to properties that increase housing stock.

Challenges

• Smaller Buyer Pool: After the ban, fewer international buyers for established homes may slow sales or reduce offers, requiring sellers to focus on local markets.
• Regulatory Complexity: Transactions with foreign buyers involve extra steps, like Foreign Investment Review Board (FIRB) approvals and higher stamp duty, which can complicate deals.

The Section 32 contract, a key document in Victorian sales outlining property details, becomes even more critical when navigating these rules.

Legal Considerations

Selling to international buyers requires compliance with specific regulations:

• FIRB Approval: Foreign investors often need FIRB clearance, especially for established homes (pre-ban) or vacant land, adding a layer of oversight.
• Additional Stamp Duty: Victoria charges foreign buyers higher stamp duty rates, which must be accounted for in pricing and negotiations.
• Section 32 Compliance: This Vendor's Statement is mandatory and must accurately detail the property's title, zoning, and conditions—essential for transparency with overseas buyers.

Non-compliance can delay or derail a sale, making professional guidance vital.

The Role of Conveyancing Services

Conveyancing services simplify these complexities. A conveyancer can:

• Prepare and review the Section 32 contract for accuracy and legal compliance
• Manage FIRB applications and stamp duty requirements
• Coordinate between parties to ensure a smooth process

Pearson Chambers Conveyancing, with over 16 years of experience in Melbourne, offers expert support. Their free Section 32 contract review service checks your documents within 48 hours, reducing risks and providing clarity especially useful when dealing with international buyers.

Conclusion and Next Steps

The Albanese Government's ban on foreign purchases of established homes and crackdown on land banking signal a turning point for Melbourne's property market. While these measures aim to prioritise local buyers and boost supply, they also shift how sellers engage with international investors. Understanding these changes trends, benefits, challenges, and legalities equips you to navigate the market effectively.

For expert help with your sale, contact Pearson Chambers Conveyancing. Their free Section 32 contract review ensures your transaction is seamless and compliant. Reach out today:

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au