The Albanese government is banning foreign investors from buying homes in Australia and cracking down on land banking practices in an effort to free up housing supply.

The government announced the ban on Monday, set to prevent all foreign investors – including temporary residents and foreign-owned companies – from buying residential dwellings. It will take effect from 1 April 2025 until 31 March 2027, when the policy will be reviewed for extension.

The move mirrors a proposal made by opposition leader Peter Dutton last year to ban foreign residents from purchasing existing homes for two years.

“This is all about easing pressure on our housing market at the same time as we build more homes,” Treasurer Jim Chalmers and Minister for Housing and Homelessness, Clare O’Neil, said in a joint press release.

To enforce the ban and enhance screening of foreign investment proposals relating to residential developments, the government will boost funding of the ATO’s foreign investment compliance team by $5.7 million over 4 years from 2025–26.

Exceptions will be given for investments that significantly boost housing supply, and for the Pacific Australia Mobility (PALM) scheme.

The government also plans to crack down on land banking by foreign investors to free up more land for homebuilding. Land banking occurs when developers buy undeveloped land, divide it into smaller parcels and offer it to investors instead of building on it.

“Foreign investors are subject to development conditions when they acquire vacant land in Australia to ensure that it is put to productive use within reasonable timeframes,” Chalmers and Minister O’Neil said.

“The Government is focused on making sure these rules are complied with and identifying any investors who are acquiring vacant land, not developing it while prices rise and then selling it for a profit.”

The government will provide the ATO and Treasury with $8.9 million over four years from 2025–26, and $1.9 million ongoing from 2029–30, to implement an audit program targeting land banking by foreign investors and enhance compliance.

“A temporary ban on foreign purchases of established dwellings, strengthened compliance activity by the ATO to enforce the ban, and an enhanced compliance approach by both the ATO and Treasury to discourage land banking by foreign investors will help ensure that foreign investment in housing is in our national interest,” Chalmers and O’Neil said.

Minister O’Neil told ABC News that between 2022 and 2023, foreign buyers purchased 1,800 properties in Australia, marking a small portion of property purchases.

Over 630,000 residential properties changed hands during the 2023 calendar year, according to data from online property exchange network PEXA.

“It’s a minor change, but a meaningful one because we know that every effort helps in addressing the housing challenge we’ve inherited,” Chalmers and Minister O’Neil said.

“The ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign investors.”