Buying investment property from overseas: A short guide
For a long time now, Australia has been a hot spot for investing in property, with people all over the world vying for a slice of the Australian real estate market.
For a long time now, Australia has been a hot spot for investing in property, with people all over the world vying for a slice of the Australian real estate market. According to the Reserve Bank of Australia, foreign investment in residential property has grown from $6 billion a year in the 1990s to more than $17 billion in 2012/13. The year after that, the value of foreign approvals for home purchases was more than 12 per cent of total dwelling turnover.
Of course, overseas investment in Australia's real estate industry need not only come from foreign buyers. In Michael Fullilove's World Wide Webs: Diasporas and the International System, he estimated the Australian diaspora at around 1 million people, scattered mainly throughout Europe, North America and South East Asia.
Many of these will be Australians who are living and working overseas temporarily, for lifestyle, career or even tax purposes. But whether these expats are aiming to stay away for good or someday return, they too may want to purchase a piece of investment real estate in Australia.
If you count yourself among either of these groups of international buyers, you'll want to be armed with as much information as you can going into an investment purchase. Consider this a short guide to buying investment property in Australia.
Why invest in Australia?
There are four core factors that make Australia a great place to invest:
23 years of uninterrupted economic growth, including a forecast GDP of 2.8 per cent between 2013 and 2019 by the International Monetary Fund
One of the most skilled, diverse and educated work forces in the world - 40 per cent hold tertiary qualification or an advanced diploma
Proximity to the quickly growing Asia Pacific export markets, coupled with the third most transparent real estate industry in the world
Total projected infrastructure investment of $125 billion between 2013-14 and 2019-20 across every state and territory
The latter is particularly significant - with such a large amount of planned infrastructure projects in the pipeline, it means a widening radius of areas that could experience significant capital growth.
The other significant attraction of Australia as an investment location is its rapidly growing population. The 2015 Intergenerational Report recently revealed that, by 2054-55, Australia's population is expected to grow to nearly 40 million - an increase of almost 17 million. This means more households needing homes, pushing up demand for currently scarce housing stock - according to Master Builders Australia Chief Executive Wilhelm Harnisch, there is currently a shortfall of 9 million homes in regard to this target.
What kind of properties can international buyers purchase?
Australian citizens, whether here or abroad, as well as foreign nationals with permanent resident visas, have no restrictions on what kind of properties they can buy. Everyone else will have to seek prior approval from the Australian Foreign Investment Review Board once they've chosen the property they want to buy.
Once you've applied, you should receive a decision between 30 days. It's also important to note that there are certain limits on what kinds of property foreign nationals can buy - broadly speaking , foreign buyers can only purchase new homes or vacant land, and only for investment purposes.
The essentials of buying an investment property in Australia
Before making your investment, be sure you're aware of the full cost of investing. You'll need at least 5-10 per cent of the purchase price to make a deposit, as well as enough to cover supplementary expenses, such as:
Stamp duty, which varies from state to state
Most foreign buyers can borrow 80 per cent of the property's value, allowing them to avoid the cost of lenders mortgage insurance.
In order to successfully invest, you'll also need to get the right investment finance. Some lenders now offer the same features and interest rates on mortgages for non-residents as they do for more typical borrowers, including extra repayments, 100 per cent off set accounts and the option of interest only loans. DPN are credited with all of the major banks and lenders, including those who offer non-resident home loans, so we can be instrumental in securing the right loan for you.
Thanks to the record low interest rate environment currently prevailing in Australia, there's never been a better time to invest. However, you won't want to enter the market without a solid strategy in place first.
This is where DPN come in. Whether you're an Aussie expat living abroad or a foreign national wanting to invest in our property market, we can provide you with a free property investment plan that matches your goals and circumstances with a specific property-buying strategy. We can then move on to finding you the right loan, and provide you with peace of mind with our rental guarantees.