The answer is yes; the Australia property market is booming for overseas buyers, with the country’s pleasant climate and cheaper cost of living making it a popular choice for retiring British expats.
However, with the Australian government’s clear intention of protecting its own citizens when it comes to international real estate, there are a number of restrictions and additional fees that foreigners must pay if they wish to buy property in Australia from abroad.
If you are thinking about purchasing property for sale in Australia, whether it’s a workplace, holiday home, main residence or as an investment, there are several things you should know about the country’s real estate market. Taking the time to research your options and finding a licensed real estate specialist to help guide you through the process will make things much easier.
Here are the steps you can take to help speed up your Australia property purchase:
- Define Your Goals
- Know the Neighborhood
- Get Approval for Your Australia Property Purchase
- Research Financing Options
- Find Out How Exchange Rates Could Affect Your Purchase
- Use a Money Transfer Provider
- Manage Ongoing Expense
Define Your Goals
The first step to purchasing property in Australia is to determine your goals. Do you want steady cash flow from a rental property, somewhere to visit on holiday or a permanent home? Or perhaps you’re looking for a home you can eventually retire to.
Your objective will play a large part in the decision-making process. For example, if you want to purchase a rental property to rent out and generate cash flow, knowing the expenses you will need to cover to not only purchase the property, but to operate it on an ongoing basis, is vital.
Expenses can include utilities, taxes, capital expenses, management, repairs and ongoing maintenance, as well as being prepared for times when the property is unlet and you have to cover all of the costs yourself with no rental income. Listing these out and estimating the costs will help you determine how much you can afford to spend.
Know the Neighborhood
Picking a property and figuring out the best way to pay for it is only part of making a good real estate investment. There are numerous other factors to consider, including location; safety and crime rates; neighborhood resources; population and job growth forecasts for the area; quality of life metrics; and access to public transportation.
All these factors, and more, can have significant impacts on the neighborhood and the value of your property.
Get Approval for Your Australia Property Purchase
Because of Australia’s strict regulations for foreign investors, it’s a good idea to find a local, licensed real estate agent or attorney to advise you on your property purchase, as there are a number of prohibitions on foreigners purchasing certain types of properties within Australia.
For example, Australia’s foreign investment policy is designed to increase the supply of new housing, meaning that foreign investors will typically not be granted approval to buy apartments or houses that have been occupied.
Foreign investors must first get approval from the Foreign Investment Review Board (FIRB). Failure to meet FIRB guidelines or to obtain FIRB approval for your purchase can lead to prosecution. In some extreme cases, it can even be used as a reason to deny you entry into Australia. To get FIRB approval, you must apply in writing to the FIRB by using their application forms. These can be accessed and downloaded on the FIRB website. Approval typically takes around 30 days.
It is extremely important to get FIRB approval before you purchase any property or sign the contract to purchase. If you don’t, you may be forced to cancel the contract or to sell your new property, potentially at a significant loss. You could also be fined or imprisoned for purchasing property when you do not have FIRB approval; providing misleading or false information; or not complying with any development conditions on your property.
While this may seem obvious, it is important to fully understand everything you sign. If English is not your native language, be sure to have any documents professionally translated and make sure you fully understand any documents you sign. A licensed real estate attorney or agent can often help locate a professional translating service.
Research Financing Options
Buying property in Australia as a non-resident or non-citizen has some restrictions and additional fees. Australian property sales do not all fall under the domain and legislation of the Australian federal government.
Each Australian state has its own government regulations for land and property purchases, as well as its own branch of the Australian Real Estate Institutes and Law Institutes, which means lawyer fees, real estate agent fees, government fees and any other fees related to real estate purchases are not consistent across the country.
In 2022, the FIRB changed its application fees for foreign investors looking to buy residential land. Fees now start at A$4,000 for purchases with a value lower than A$75,000, moving up to A$13,200 for purchases of $1m or less.
For purchases over A$1m, fees increase by A$26,400 for every additional A$1m considered, up to a maximum of A$1.045m for acquisitions over A$40m. However, the exact fees you’ll pay will change depending on the exact situation, so it's worth checking with the FIRB directly.
While many overseas property purchases today are all-cash offers, many buyers still prefer to borrow, which helps to reduce personal liability. But it can be more difficult to get a mortgage if you are buying property abroad. While it’s possible to fund your purchase overseas, it can take longer and you may be limited to borrowing up to 50% or 60% of the property value.
It is a good idea to talk with a money transfer specialist or broker early in the process. In general, it is usually advisable to borrow in the currency used to service repayments so that your asset (the property) matches your liability (the debt).
Find Out How Exchange Rates Could Affect Your Purchase
The Australian dollar is particularly volatile, and fluctuating exchange rates can expose you to potential losses when you transfer money overseas to pay for your property abroad.
For example, if you’re planning on buying a property for £100,000, a 10% dip in the exchange rate between the pound and the Australian dollar could put that property out of your budget.
There are a number of ways to not only manage this risk but also take advantage of these fluctuations to add extra cash in your pocket for that piece of furniture you’ve been eyeing. That’s why it’s a good idea to contact a money transfer provider early on in the process. They can discuss options for managing the uncertainty of international currency markets.
Most money transfer providers offer a variety of products that can help you lock in a future exchange rate, such as forward contracts, hedging strategies or automated payments. This helps to protect you from currency changes that are not in your favour.
Foreign currency specialists can also help you decide if it’s beneficial to pay in your home currency or in Australian dollars. Refer to the overseas property buying checklist for questions to consider, and visit our historic exchange rates page for a big picture view of current currency market trends.
Use a Money Transfer Provider
Your financial transactions do not end with closing on the house. You’ll need to transfer money to Australia regularly to pay the mortgage and for general maintenance of your property. Making sure you have the funds available when you need them to pay for deposits and fees is absolutely crucial.
Give yourself enough time to research your options for any deposits or fees you will need to pay. While it is often assumed that using a bank for international money transfers is the best way to send money overseas, you can usually get a much better deal via specialist currency brokers.
Money transfer service providers not only offer low- or no-fee services, but favourable exchange rates that can help you save enough to potentially cover the cost of professional fees associated with the purchase, or to pay for new furnishings.
Specialist money transfer brokers generally offer better rates than banks, but also do not charge extra fees for transfers, especially if the amount you are transferring is above a certain level. Brokers are experts in transferring money to pay for an overseas property purchase. Their many benefits and services include:
- Better exchange rates than the banks offer
- No fees or commission
- Security against exchange rate fluctuation (you should talk to providers about fixing a future exchange rate)
- Hedging currency exposure
- Fast international payments
- A dedicated account manager tailored to your needs
You can compare rates for pounds to Australian dollars, US dollars to Australian dollars or euros to Australian dollars to see the difference and savings. You can also refer to the overseas property buying checklist to save on your overseas property.
Manage Ongoing Expenses
International real estate purchases are not cheap. Be sure to factor into your calculations additional and ongoing expenses that could be relevant to your situation, such as closing costs, agent fees, translation fees and repair or maintenance fees.
If you need to make ongoing, regular payments, setting up a recurring payment plan with a money transfer provider makes the process much easier to manage and can save costly monthly bank fees, as well as saving you time by automating the process.
It is even easy to maximise any income or proceeds from a sale that you may want to repatriate by taking advantage of a money transfer provider’s services.
There are a number of online money transfer service providers available, some specialising in specific countries or offering specific services. So it is essential to shop around and compare different providers to find the best broker for your needs.
Start by comparing specialist money transfer providers and select one to help you run through these checklists/tools.
