Thinking about buying property in Australia? Whether it’s an investment or a second home, there are a few essentials to keep in mind to save yourself some hassle. We’re here to walk you through a guide to ensure you’re properly prepared:
1. Know the Australian Real Estate Market
The Aussie real estate market is fairly unique – demand varies between major metro areas and quite rural regions. You’ll usually see the following high-demand cities with the highest price tags:
- Sydney
- Melbourne
- Brisbane
As with any country, smaller cities and regional areas are by far the more affordable option, but the housing market as a whole is influenced by a range of factors:
- Interest Rates
- Housing Supply
- Local Economic Trends
This means it’s essential to do your research on recent trends for whichever region you’re considering. Small cities are definitely cheaper, but you’ve got the potential for appreciation in high-growth areas, so this makes them a better investment.
2. Understand Foreign Buyer Regulations
Foreign buyers need to be approved by Australia’s Foreign Investment Review Board (FIRB) in order to buy a house – this comes with fees and restrictions, so factor this into your timeline and budget.
You’ll be able to purchase:
- New Properties
- Off-the-Plan Properties
- Vacant Land for Development
Expect restrictions on buying existing properties – permanent residents and citizens can bypass these, but it’s worth double-checking if you’re unsure of your eligibility status.
3. Get Familiar with Stamp Duty and Other Fees
Stamp duty is another major cost you need to budget for. However, it varies depending on the state and property value. Certain states will give concessions out for any first-time buyers or people buying newly built homes, but ensure you go out your way to check for other exemptions that could apply.
Beyond stamp duty, expect to pay a range of other costs:
- Legal Fees
- Building Inspections
- Mortgage Setup Fees
- Insurance
If you’ve got a clear understanding of these expenses, then you’ll not be surprised if and when they arise later on.
4. Set Up a Mortgage Pre-Approval
You’ll have a far clearer idea of your borrowing capacity if you get a mortgage pre-approval before you start property hunting. These are called “conditional approval” by the banks, and they show you the loan amount you’re eligible for based on your:
- Income
- Savings
- Credit History
There are a lot of properties out there on the market that won’t be in your budget, so this is a solid way of narrowing down your search and showing sellers that you’re a serious buyer. Just remember that pre-approval doesn’t guarantee a final loan approval – you’ll still need to finalise your mortgage once you’ve chosen a property.
5. Consider the Loan-to-Value Ratio (LVR)
The majority of Aussie banks will lend you around 80% of a property’s value before they require lender’s mortgage insurance (LMI). If you’ve got a down payment that’s less than 20% (so if your LVR is above 80%), there’s a strong chance you’ll need to pay LMI.
While this can add thousands to your mortgage cost, lenders need security like this to ensure they’re protected from potential loan defaults. The best way of avoiding LMI is to save for a 20% deposit, but if you can’t do that, then be prepared for the added costs.
6. Research Neighbourhoods and Lifestyle Factors
Whether you’re looking for a buzzing city centre, a peaceful coastal town, or the suburbs, you’ve got plenty of choice when searching for real estate variety. To make the right decision, ensure you’re choosing a location that’s based on both practical factors and your lifestyle preferences.
Proximity to work is going to have a major impact on your daily commute, so don’t choose somewhere that’s not reasonably close to your office building. Aside from this, you’ll also have a better experience in your new neighbourhood if you’ve got access to:
- Public Transport
- Good Schools
- Healthcare Facilities
- Shopping Centres
- Recreational Areas
Different Aussie cities have different vibes and communities – go to Sydney if you want:
- A Fast-Paced Lifestyle
- Career Opportunities
- Cultural Diversity
- Stunning Beaches
Melbourne might be more suitable if you’re a fan of:
- Arts
- Coffee Culture
- Green Spaces
Brisbane has a more relaxed, subtropical way of life, while cities like Perth and Adelaide are quieter and more family-friendly. It’s great if you can visit these places in person beforehand so you’ve got an idea of what they’re like, but the next best thing is checking out local community pages on social media.
7. Hire a Conveyancer or Solicitor
There’s a lot of complex bureaucracy and legalities involved when you’re buying a house in Australia, so it might be wise to hire a skilled conveyancer or solicitor at some point. These professionals manage the following on your behalf:
- Title Transfers
- Contract Reviews
- Ensuring the Sale Complies with Australian Laws
- Protecting Your Rights as a Buyer
- Conduct Due Diligence
- Confirming the Property’s Title is Clear of Encumbrances, Restrictions, or Unpaid Rates
If you can hire a conveyancer early in the process – even before you’ve made an offer – it’ll streamline things significantly. Not only will they give you solid insights into contract terms and recommend conditions to include (like cooling-off periods or specific repairs), but they’ll also help explain local regulations you may not be aware of.
Choosing a professional with experience in the area you’re buying in is ideal since property laws and required searches can vary by state.
8. Know Your Property Types: Freehold vs. Leasehold
In Australia, a property can either be freehold or leasehold, depending on the type of ownership. Freehold ownership is where you own the land and property outright – leasehold ownership means you only own the building but lease the land from the owner for a specific time period.
The majority of residential properties are freehold, but it’s still good to be aware of this distinction if you’re a foreigner with little experience in buying a home. Leasehold properties are common for certain types of property – such as apartments or properties in specific areas – so always confirm the ownership type before purchasing.
9. Get a Building and Pest Inspection
Australia has a wide range of climates – properly a lot more harsh than where you’re coming from – and certain areas are prone to pests like termites or other conditions that affect a property’s structure. For any home purchase, especially older properties, it’s imperative to have a building and pest inspection.
This is how you identify issues that may not be visible at first glance, such as:
- Structural Damage
- Mould
- Pest Infestations
Ultimately, this is a small cost that can potentially save you thousands in expenses later on, so it’s more than worth doing.
10. Prepare for Closing and Settlement Process
Once your offer is accepted, you’ll enter the settlement phase – this can take between 30 to 90 days. During this time, the seller transfers the title to you, and you finalise your mortgage. The exact timeline here depends on your contract terms and any conditions they outline in the purchase agreement.
This is where your conveyancer and solicitor will be most active since they need to handle all the legal formalities and ensure everything is in order. Preparing for the settlement phase in advance by confirming all financials and documentation will help you avoid any last-minute delays.
Conclusion
Looking to purchase a new home in Australia? Whether it’s a primary residence, second home or investment property, you’ll need to secure a mortgage. So, make sure you utilise Upscore’s Finance Passport – we connect you with a range of expert brokers so that you can find the best possible loan terms. Get started today and explore your options!
