Why invest in property in Australia?
Surprisingly, many Australian residents who hold temporary visas or permanent visas don’t even realise they can qualify for a home loan and are missing on the benefits of the Australian real estate market.
Australia’s property market has a proven record of stable prices.
What’s the big difference between Australia and other property markets?
- Around 70% of Australian households are home owners so there is relatively little speculation.
- There’s been a consistent under-supply of housing in most capital cities.
- Australia has responsible lending legislation and prudent economic management via the Australian Prudential Regulation Authority (APRA), reducing the risk of asset price bubbles.
- Australia has never had prices fall more than 20% in one year.
Overseas property markets such as Hong Kong or the USA have suffered significant crashes that are completely unheard of in Australia.
Housing prices in volatile economies can drop up to 70% within a few weeks, leaving investors with huge losses.
This is often because of significant speculation from foreign investors or asset price bubbles fueled by debt.
Investors have a smaller impact in Australia as the majority of the housing market is owner occupied.
In fact, during the 2007/09 Global Financial Crisis which saw property prices in the UK and USA fall significantly, Australian property prices actually increased in value.
Want to get started on your home buying journey?
We can help you qualify for a non-resident mortgage in Australia so please call us on 1300 889 743 or fill in our free assessment form to speak with one of home loan specialists.
Consistent growth performance
Australian properties have enjoyed consistent capital growth over the last 100 years, with property prices doubling roughly every 7 to 10 years.
One of the reasons behind the growth is Australia’s chronic housing shortage in many of the major cities.
The population is growing at a rate much faster than dwellings are being constructed.
The main cap on housing prices is in fact affordability.
Prices have largely risen in line with the market’s ability to pay for housing.
It’s easy to invest in Australia
Many countries have very restrictive foreign investment laws or banking regulations that make it difficult to invest.
This isn’t the case in Australia:
- You don’t need to setup a company in Australia or buy with a citizen.
- Government approval for foreign investors is simple and inexpensive. Read about the rules below.
- Specialist mortgage brokers can assist you to obtain finance.
- There’s strong and effective consumer protection legislation in Australia through the National Consumer Credit Protection Act 2009 (NCCP Act)
- Australia’s legal system is based on the UK system so it’s familiar to many investors.
- There’s minimal political, social, economic or national security instability in Australia.
Buying property in Australia from countries like China, the UK or USA can be difficult if you don’t have the right information or you don’t have the right professionals on your team.
These professionals include a real estate agent or buyers agent, a solcitor, an accountant and a mortgage broker that specialises in foreigner mortgages.
Complete our free assessment form or call us on 1300 889 743 and one of our mortgage brokers will contact you to let you know if you qualify for a mortgage.
Australia is a great place to live
Australia is well known for its diverse international cities and breathtaking natural beauty.
- Queensland (QLD) is famous for its wonderful beaches and reefs
- Victoria (VIC) has a stunning coast line stretching to South Australia (SA)
- The Northern Territory (NT) is renowned for its distinctive outback experience
- New South Wales (NSW) for the tranquil Blue Mountains, beautiful coast and Sydney
Over the next 50 years it’s expected that the trend of migration to Australia will continue and property prices will rise as a result.
Investors can buy residential or commercial properties?
Do you need help with getting a foreigner mortage?
Thinking of investing in Australia?
Call us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) or complete our free assessment form to speak to our specialist mortgage brokers.
They can guide you through the application process.
The buying process
Before you begin – budgeting & planning
It’s essential that you research, plan and budget your property purchase in Australia.
You may have a location in mind, but it’s always helpful to speak to a real estate agent who can offer you some local advice that will help you select an affordable area with great returns.
Making sure that you can afford the property is also important. Australian banks won’t lend to you if you can’t prove that you can afford the debt, so you need to have a realistic and affordable budget in place.
Step 1 – Organise your team of professionals
You’ll need a conveyancer or a solicitor to take care of the legal work for you. Their job is to complete searches on the property, manage the transfer of ownership and review the contract before you sign it.
Keep in mind that your appointed conveyancer must be in the same state as the property you’re buying or at least be licensed to deal with that state.
For Western Australia (WA), they are called settlement agents.
Please view our list of recommended conveyancers if you don’t have one already.
It’s common for a real estate agent to recommend a conveyancer to you but we suggest that you choose one that is likely to be impartial.
A good Australian mortgage broker, with experience in helping non-residents to apply for a mortgage, is an essential member of your team of experts.
The mortgage broker can be anywhere in Australia, they don’t need to see the property you are buying and, for most residential mortgages and loans, their services are free.
If you want to buy a property in Australia, speak to an expert Australian mortgage broker.
We’re specialists in non-resident mortgages, hold an Australian Credit Licence (ACL) and are also a member of both the Mortgage and Finance Association of Australia (MFAA) and the Credit and Investments Ombudsman (CIO).
We can finance properties Australia-wide and we regularly work with international borrowers.
We have a panel of nearly 40 lenders to choose from which ensures that you’re getting the best mortgage available.
If you need finance to purchase property in Australia, call us on 1300 889 743 (+61 2 9194 1700 from outside Australia) or complete our free assessment form to discuss your options.
Accountant (if required)
You don’t need to appoint an accountant but there are a few benefits in having one.
Your accountant can help you structure your financials and save you money on tax because they are on Australian tax legislation.
If you’d like to set up Australian companies or trusts to hold your investment, then you’ll need an accountant.
Your appointed accountant can be located anywhere in Australia.
Buyer’s agent (if required)
A buyers agent is also very useful if you’re located overseas and can’t physically inspect the property you’re buying.
The main job of a buyer’s agent is to source the property and negotiate a great deal on your behalf.
They’ll deal with the real estate agents for you and ensure that the property you’re buying represents a good opportunity.
Your buyer’s agent must be licensed and have some presence in the state that you’re buying a property in.
Keep in mind that a buyer’s agent should give independent and objective advice: they shouldn’t be selling his/her own properties.
Some buyer’s agents will charge a fixed fee, while some other will charge an upfront fee as well as a percentage of the purchase price of the property.
A true buyers agent will not earn any commission from the seller so, if they are, they are working for the seller and not for you!
We can put you in touch with some reputable buyers agents if you need assistance.
Step 2 – Applying for a mortgage
In order to qualify for a mortgage, it’s essential that you obtain a pre-approval before you begin looking for properties.
However, the lending criteria for non-residents can be very complex and, for foreign investors at least, there are less than a handful of lenders who are lending in this space.
- We have published a handy guide which shows the best available Australian interest rates for foreign investors.
- Ensure that you prepare all necessary loan documents, such as payslips, tax returns and even an employment letter to prove your income.
You can find specific lending guidelines for your situation here:
- Investors from overseas: If you’re a foreign citizen looking to buy an investment property in Australia.
- Temporary residents: If you’re living in Australia on a temporary visa such as a work visa or a spouse visa.
- Australian expatriates: If you’re an Australian citizen looking to buy real estate in Australia.
- NZ investors: If you’re a New Zealand citizen then some lenders have less restrictive lending guidelines.
To ensure that you get approved, speak to us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) or complete our free assessment form and one of our brokers will get back to you.
We offer free assistance and can help you with your home loan application.
Step 3 – Get your loan pre-approved
It’s essential for you to get your mortgage pre-approved before you begin looking for a property.
Good properties don’t stay on the market long!
The buyer with a pre-approval usually snaps up the best investments while the others are still putting their mortgage applications together.
More importantly, you know that you’re eligible for a loan and how much you can borrow.
Why waste your time looking for a house or unit only to find out that you can’t get a loan?
Step 4 – Confirm you qualify with the FIRB
If you’re a non-resident or a temporary visa holder, you’re legally required to get permission from the Foreign Investment Review Board (FIRB) to buy property in Australia.
Australian citizens, Australian permanent residents and New Zealand (NZ) citizens don’t require FIRB approval.
Getting FIRB approval is a simple process and usually takes up to two weeks from the date the application is lodged.
Fees can vary depending on the value of the residential property or land that you want to purchase:
- $1 million or less: $5,000
- $1 million to $1,999,999: $10,000
- $2 million to $2,999,999: $20,000
- $3 million or more: $10,000 per every $1 million
- Agricultural land: You must notify FIRB when purchasing farmland worth $15 million or more so the fees can be substantial.
You won’t actually need to apply for FIRB approval until you’ve found a property.
However, you should investigate their requirements so that you don’t buy an ineligible property for foreign investors.
Step 5 – Find a property
Now is the time to visit Australia and begin your search for a property.
The other option is to use a buyer’s agent (see above).
If you decided not to use a buyer’s agent, then it may be a good idea to use comparable sales to value the property.
Make sure that you compare your properties to other properties that have sold outside of the development so you get a more accurate value.
Often the bank chosen by your mortgage broker will value the property.
The problem is that the banks often don’t tell you if the valuation comes in short!
Our mortgage brokers will always inform you if they become aware that you have overpaid for a property.
Step 6 – Negotiate the purchase price
As a general rule, Australian properties usually sell for up to 10% less than the listed price.
This varies depending on the market, location and type of property.
Properties in popular suburbs sometimes sell for more than the price that they’re advertised!
Some real estate websites will publish the “discounting percentage” for particular suburbs, which is the average percentage below the listing price that a property sells for.
If you’re using a buyer’s agent, they’ll help you to negotiate the price.
You can ask for a contract before signing and ask your solicitor or conveyancer to look at the contract and add any additional conditions if necessary.
A common condition is that the sale is “subject to FIRB approval” which allows you to cancel the contract in the unlikely event that you don’t get approval from the Australian government.
Each state of Australia has their own property laws, use your conveyancer or solicitor’s expertise to help guide you.
If the vendor allows a cooling off period, you can put a holding deposit and sign the contract.
Refer to your conveyancer or solicitor, they’ll let you know what checks you have to do before buying and will let you know when it’s safe to sign the contract to buy the property.
If you’re unable to get a loan during the cooling off period, your maximum penalty is the holding deposit, usually up to $1000.
Again, please check with your conveyancer or solicitor as this can vary across the different states.
If you plan to sign the contract prior to the cooling off period, ensure that the contract of sale includes the clause “subject to FIRB approval”, otherwise you’ll be breaching the law.
Step 7 – Obtain formal mortgage approval
When you’ve found a property to buy, you can then forward the contract of sale to us as your mortgage broker to proceed with the formal approval.
Remember, don’t commit yourself to buy a property until your mortgage is formally approved.
If there’s a cooling off period it’s okay to sign the contract, otherwise don’t sign the contract until you know that you can get a mortgage.
Once you forward the contract of sale to us, we’ll usually obtain the formal approval within a week.
Step 8 – Exchange contracts and pay your deposit
You can exchange your contract after your loan has been formally approved and your solicitor or conveyancer gives you the go ahead.
Normally, you’ll need to put down a 10% deposit.
The amount of the deposit is negotiable and differs between the states.
Note that once you’ve committed to a property, you can’t back out so please seek legal advice before signing any contracts or paying your deposit.
Step 9 – Seek FIRB approval
It’s very important that the contract you’re signing has the clause “subject to FIRB approval” and 30 days must be allowed for a FIRB decision.
At this point, it’s vital to check with your conveyancer or solicitor that the clause is stated in such a way so as to ensure that if your FIRB proposal is rejected, you won’t lose your deposit.
A FIRB application is simple to do and will usually be taken care of by your conveyancer.
You may need to provide a copy of the approval to your lender prior to your loan being advanced.
Step 10 – Final Arrangements
Once you have exchanged the contract, forward a copy of the signed contract to the FIRB for approval.
Your bank would have sent out the loan contract to you after formal approval.
You can ask your mortgage broker to go over it with you, or get help from your conveyancer or solicitor.
You have the right to obtain independent legal advice about your loan contract.
To accept the loan offer, sign the appropriate sections and return the loan documents back to the bank.
Do a final inspection on your property the day of settlement. This can be completed by your buyers agent if you’ve hired one.
Step 11 – Settlement
“Settlement” is the term used when the property actually changes hands and your loan is advanced.
This will be handled by your conveyancer or solicitor in conjunction with your bank and mortgage broker so you don’t need to be there for this to happen.
The title for the property is held by your lender for safe keeping and the keys are available for pick up from the selling real estate agent.
What are the costs of buying a property?
As a general rule, you should allow roughly 5% of the purchase price for various expenses associated with purchasing a property.
- Legal fees – Often $800 to $2,000.
- Loan establishment fees – Usually $0 to $895 depending on the lender.
- Stamp duty (state government taxes, often this is the largest expense) – Please refer to our Stamp Duty calculator
- Additional stamp duty – Please see the foreign citizen stamp duty page for more information about changes made to stamp duty and land tax for foreign buyers buying in Queensland, New South Wales, Victoria and South Australia. These changes aren’t always reflected accuratly by our calculator due to regular changes to state government policy.
- FIRB approval fees – Varies depending on the value of your property and if you are a temporary resident or foreign citizen investor with no visa to Australia.
- Property inspection fees – normally up to $800 in total for a building, pest and strata inspection.
- Buyers agents fee – Varies depending on the nature of the services provided.
- Other minor costs – Building insurance, council rates, water rates, adjustments, etc.
Refer to your conveyancer or solicitor for an exact breakdown of the costs associated with your real estate purchase.
Why was the stamp duty levy introduced?
When introducing the foreigner stamp duty levy, the Victorian, New South Wales and Queensland governments said that it was only fair that foreign investors pay their fair share to fund government services and infrasture.
Luckily, the levy only applies to NSW, Vic and QLD.
You can avoid the extra stamp duty by either buying in another state, purchasing as joint tenants with an Australian citizen or simply waiting until you become a permanent resident.
What other rules and taxes apply to foreign buyers
Since the stamp duty levy was introduced in 2016, the Government has worked to put pressure on foreign ownership of Australian real estate.
Below are changes to foreign property ownership that the Government proposed in the Federal Budget 2017.
CGT exmption scrapped
Since 1 July 2016, foreign investors were subject to a Capital Gains Tax (CGT) (withholding tax) of 10% when they sold their own residential home. However, this only applied to properties worth $2 million or more.From 1 July 2017. this threshold reduced to $750,000 and the withhold tax rate increased to 12.5%.
This change will affect many foreign investors buying in Sydney and Melbourne metro areas since the median house price is much higher than $750,000.
Restriction on new developments
The Government placed a 50% cap on foreign ownership of new developments.
The so-called ghost tax is a minimum $5,000 per year levy for property they either faily to occupy or lease out for at least 6 months of the year.
How do I manage the property?
If you’re buying the property as an investment and are intending to rent out your property, you have two options.
You can either manage the property yourself, or you can use a property manager.
Professional managing agents will look after every aspect of your tenancy.
Their job includes collecting the rent, maintaining financial records, conducting regular property inspections, handling any disputes and arranging all repairs that need to be done.
Most property managers charge a percentage of the weekly rent as management fee, usually around 5-10%, although this is negotiable.
You should also expect to pay additional one off fees when they find a new tenant.
Last but not least, please make sure that the managing agent you are interested in using is licensed by the Office of Fair Trading (or state equivalent) before you enter into any formal agreement.
Their licence will be displayed in their office or on their website.
Do I need to lodge a tax return in Australia?
Yes, you’ll need to lodge a tax return each year in Australia.
This isn’t too difficult to do.
Your property manager should keep all of the records for how much rent you received and which expenses you incurred.
You can have them transfer these details to your Australian accountant who will then prepare your tax return.
Do you need help with a non-resident loan?
Our mortgage brokers specialise in lending to:
- Australian expats
- Foreign investors
- Permanent residents of Australia
- Foreign citizens living in Australia (temporary residents)
- Prospective spouses or defacto partners of Australian citizens
Please complete our free assessment form or call us on 1300 889 743 or +61 2 9194 1700 if you’re outside Australia.