The Australian property market has long been a magnet for international investors seeking stability, transparency, and capital growth. However, in 2025, major changes to the foreign investment framework reshaped the way overseas buyers can engage with the Australian real estate market—particularly in Sydney, one of the most desirable destinations for international property purchasers.
At Buyer’s Domain, as experienced buyers’ agents based in Sydney’s Inner West, we assist international investors in navigating these evolving regulations, ensuring compliance while helping them identify premium opportunities within legal frameworks.
The New Legal Landscape: Foreign Investment Restrictions (2025–2027)
From 1 April 2025, the Australian Government introduced a two-year moratorium on purchases of established dwellings by foreign investors, applicable until 31 March 2027. The regulation impacts non-resident foreign individuals, foreign-controlled entities, and temporary residents, prohibiting them from acquiring existing residential properties unless a limited exception applies.
The stated objective behind this reform is to increase housing affordability and prioritise Australian homebuyers amidst ongoing supply shortages in metropolitan regions such as Sydney. Government authorities, including the Australian Taxation Office (ATO) and the Foreign Investment Review Board (FIRB), have introduced robust compliance measures to ensure strict adherence to these new laws.
Key Restrictions and Exceptions
While the general prohibition targets established residential dwellings, foreign investors may still participate in certain categories of property acquisition. The following outlines the legally permissible investment classes as of 2025:
- New Dwellings: Foreign investors can purchase new residential properties without restriction, provided they secure FIRB approval prior to acquisition.
- Off the plan property.
- Vacant Land: Foreign investors may acquire undeveloped land, on the condition that substantial construction commences within four years of settlement.
- Redevelopment Projects: Purchase and redevelopment of existing dwellings may be approved where the proposed redevelopment increases the housing supply.
- Exemptions: Permanent residents, New Zealand citizens, and spouses of Australian or permanent residents (when purchasing as joint tenants) remain exempt under the current legislation.
These exceptions preserve pathways for certain categories of international investors, particularly those contributing to Australia’s housing supply or employment through development activity.
FIRB Approval and Compliance Requirements
For eligible foreign buyers, obtaining FIRB approval remains the first crucial step. Applications must be filed prior to executing a property purchase, and all contracts should be explicitly conditional upon FIRB approval to mitigate compliance risk.
The FIRB review process assesses whether a proposed investment aligns with Australia’s national interest, considering factors such as:
- National security implications.
- Market stability.
- Supply chain integrity.
- Economic contribution through development or job creation.
Non-compliance, including acquiring property without appropriate approval, can lead to severe penalties such as forced divestment and fines exceeding several million dollars.
Increased Fees and Tougher Enforcement
Coinciding with the 2025 reforms, FIRB application fees and compliance costs have increased to reflect stricter screening and administrative oversight. The Australian Treasury allocated additional funding to expand the ATO’s foreign investment compliance unit, enabling comprehensive audits and real-time enforcement actions.
For instance:
- Foreign land banking—the practice of acquiring vacant land and delaying development—faces heightened scrutiny. Investors are now required to demonstrate progress on construction within the designated timeframe or risk financial penalties and compulsory divestment.
- Enhanced auditing applies to previously approved developments, ensuring adherence to conditions tied to national and regional housing objectives.
Impact on Sydney’s Property Market
Sydney’s real estate environment has been significantly influenced by these reforms. The Inner West, Eastern Suburbs, and Lower North Shore—previously popular with international investors—are now witnessing a shift in demand composition.
The temporary ban has reduced foreign competition for established homes, potentially easing price pressures for local buyers while redirecting overseas demand towards new developments.
For new residential projects, particularly in up-and-coming suburbs such as Marrickville, Dulwich Hill, and Ashfield, foreign capital continues to play a vital role in project funding and off-the-plan purchases. Consequently, developers are increasingly targeting international investors through compliant channels that prioritise new build opportunities.
Taxes, Fees, and Ongoing Obligations for Foreign Buyers
Foreign investors remain subject to a series of Commonwealth and state-level levies designed to regulate and fund housing accessibility initiatives. In New South Wales, these include:
- Foreign Owner Duty Surcharge: Presently calculated at 9% on the dutiable value of residential property.
- Foreign Land Tax Surcharge: Levied annually at 5% of land value for non-resident owners.
- Vacancy Fees: Payable where a property remains unoccupied for more than six months in a calendar year.
These surcharges are in addition to normal rates of stamp duty, land tax, and capital gains tax (CGT) applicable to all property owners. Investors must maintain accurate records and meet statutory deadlines for tax filings and disclosures to avoid penalties.
Strategic Opportunities for Compliant Foreign Investors
While the federal moratorium restricts certain activities, the strategic opportunities for compliant foreign investors remain substantial in 2025:
- Off-the-plan acquisitions allow investors to secure assets at pre-completion prices, often yielding favourable capital appreciation.
- Joint-venture developments involving Australian partners enable participation in residential construction projects without breaching foreign investment restrictions.
- Long-term rental yields in newly built properties across Sydney’s growth corridors, including Parramatta and the Inner West, offer attractive returns amid increasing urban densification.
With careful planning, foreign investors can achieve strong, legally sound exposure to Sydney’s resilient property market.
How Buyers’ Domain Supports International Investors
At Buyer’s Domain, we leverage extensive local expertise to assist foreign clients in navigating the complexities of Australia’s investment regime. As licensed buyers’ agents based in Leichhardt, in the heart of Sydney’s Inner West, we provide:
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- Detailed property searches targeting newly constructed or development-approved assets.
- Negotiation and acquisition support that ensures compliance with 2025 legislative frameworks.
- Partnerships with specialist solicitors and tax professionals experienced in cross-border property transactions.
Through this integrated approach, we safeguard client interests while maximising investment potential under the current legal architecture.
Final Reflections: Navigating the Future of Foreign Investment
The Australian property market’s evolving regulatory environment requires informed guidance and precision. The 2025 reforms reinforce the government’s commitment to protecting national housing affordability, while maintaining a controlled gateway for productive foreign capital.
For international investors, compliance and strategic collaboration with experienced buyers’ agents such as Buyer’s Domain are not merely prudent—they are indispensable for success in Sydney’s competitive real estate market.
To explore compliant investment opportunities and detailed advisory support, connect with our Sydney-based team.
We remain dedicated to helping overseas investors proceed with clarity, confidence, and full legal compliance in Australia’s dynamic property landscape.
