How To Buy Property In Australia
Buy property in Australia from overseas
When it comes to investments, there are a lot of options – businesses, the stock market and properties. However, if you want a low risk profitable investment, choices are limited.
Investing in Australian properties has become popular with overseas investors looking for returns and stability not available in their own country.
Australia’s property market has a proven record of stable prices. What’s the big difference between Australia and other property markets?
- Approximately 70% of Australian households are home owners. 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 which reduces 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.
Since 1900 when records began, the Australian market hasn’t suffered a fall in median house prices over 20% in one year. This is true even the Global Financial Crisis of 2007 to 2009 which saw property prices in the UK and USA fall significantly. Australian houses actually increased in value during this period.
The Australian Prudential Regulation Authority (APRA) manages the lending activities of the banks, which reduces the risk of unsound lending practices causing an unsustainable rise in prices.
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. Effectively, prices have 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.
- Specialist mortgage brokers can assist you to obtain finance.
- There’s strong and effective consumer protection legislation in Australia.
- Australia’s legal system is based on the UK system so it’s familiar to many investors.
- There’s minimal political, social or other types of instability in Australia.
Buying a property in Australia from countries like China, the UK or USA can be difficult if you don’t have the right information or enlist the services of the right people.
You can complete our free assessment form on our website or call us on 1300 889 743 and one of our mortgage brokers will contact you to provide advice on financing your Australian property investment.
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) for its stunning coast line stretching to South Australia (SA), The Northern Territory (NT) for its distinctive outback experience and New South Wales (NSW) for the tranquil Blue Mountains, beautiful coast and Sydney.
Investors can buy commercial properties
Stability and growth aren’t just features of residential houses, townhouses and units. Most commercial properties such as offices, factories and retail outlets have proven themselves to have excellent returns. Larger foreign investors tend to prefer commercial property, resorts, hotels or developments.
It’s also possible to get foreigner commercial loans from some Australian lenders.
Do you need help with finance?
Thinking of investing in Australia?
Call us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) to speak to our specialist mortgage brokers who can guide you through the application process. Call us today or fill in our free assessment form.
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 is common for a real estate agent to recommend a conveyancer to you however 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 loan, 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. For most residential mortgages and loans, their services are free.
If you want to buy a property in Australia then 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 Ombudsman Service Limited (COSL).
We can finance properties Australia-wide and we regularly work with international borrowers. We have a panel of over 40 lenders to choose from which ensures that you’re getting the best mortgage available.
If you need finance to purchase property in Australia then please 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.
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 real estate you’re buying.
The main job of a buyer’s agent is to source and negotiate the ideal property for you. They’ll deal with the real estate agents for you and will 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, so should not 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. If they are accepting commission from the seller than they are working for the seller 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 obtain finance 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!
- 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 or 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 approval, speak to us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) or complete our free assessment form and our staff will get back to you.
Our mortgage brokers can offer free assistance and will help you with your 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-approved loan usually snaps up the best investments while the others are putting their loan 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 - Seek FIRB approval
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) if you want to buy property in Australia.
Australian Citizens, Australian permanent residency holders and New Zealand (NZ) citizens are exempt from obtaining FIRB approval.
Getting FIRB approval is a simple process and usually takes up to two weeks from the date the application is lodged.
You won’t actually apply for FIRB approval until you have found a property. However you do need to investigate their requirements so that you don’t buy an ineligible property for foreign investors.
Step 5 - Find a property to buy
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 as this will mean you get a more accurate value.
Often the bank chosen by your mortgage broker will value the property, however 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 their list price. This varies depending on the market, location and type of property. Property in popular suburbs sometimes sell for more than the price that they’re advertised at!
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, then they’ll help you to negotiate the price.
You can ask for a contract before signing, and get 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, and 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 loan.
Once you forward the contract of sale us we’ll usually obtain the formal approval within a week.
Step 8 - Exchange contracts & 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 - 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 given to 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, 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 – Some states charge additional stamp duty for foreign investors. This is not taken into account by our calculator.
- 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.
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%, however 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) and prospective spouses or defacto partners of Australian citizens.
Please fill in our free assessment form or call us on 1300 889 743 or +61 8068 2257 if you’re outside Australia.
Still have questions? Feel free to comment below and we’ll get back to you as soon as possible.