In a move to address an escalating rental crisis, the Australian government has announced plans to significantly increase fees on foreign buyers of existing homes left vacant. The government hopes the move will help ease the tight housing supply that has contributed to a surge in rental prices, which rose by 7.6% nationally in the year ending September 30, marking the steepest increase in 14 years.

Treasurer Jim Chalmers highlighted the urgency of the situation, saying, “There are too many properties empty around Australia, not enough homes available to Australians who desperately need them.” In response, the government plans to introduce new legislation next year to encourage foreigners to invest in new housing developments rather than acquiring existing properties.

Currently, foreigners are prohibited from purchasing established homes in Australia unless they reside in the country for work or study, with the requirement to sell the homes upon departure. To discourage foreign investment in existing homes, the government imposes a foreign investment fee, which varies based on the home price. For example, the fee for a median-priced Sydney home over a million Australian dollars is currently Aus$28,200 (US$18,500).

Under the proposed scheme, this foreign investment fee will be tripled. Foreign owners of established homes left vacant for more than six months will face a doubled annual vacancy fee, previously equivalent to the foreign investment fee. The combined effect amounts to a six-fold increase in annual fees for foreign buyers who leave existing homes unoccupied.

While the government aims to incentivize foreign investment in new housing developments, the extent of foreign ownership’s impact on the rental market remains uncertain. Treasurer Chalmers acknowledged that vacancy fees imposed on foreign owners of existing homes currently generate around Aus$5 million annually. He mentioned a report indicating only 23 such “breaches” in the past year, but expressed skepticism, suggesting the numbers might be underreported.

In addition to the fee hikes, the government plans to reduce fees for foreign investors participating in build-to-rent projects. This multi-pronged approach seeks to address the housing supply issue and make housing more accessible, aligning with the government’s recent establishment of a Aus$10 billion investment vehicle dedicated to increasing the supply of social and affordable housing. As these measures unfold, Australia anticipates a more balanced and accessible housing market in the near future.