If you’re thinking about purchasing real estate in a foreign country you’re probably either looking to get your dream holiday home or just an investment property that’s got global potential.
That said, it’s not exactly an easy process. Some countries are worse than others, but depending on where you go it’s not always so simple – buying property overseas comes with unique challenges that don’t apply back home.
So, we’ve put together a few tips to help you make informed decisions when buying a house abroad.
Why Buy Property Overseas?
For both lifestyle and financial reasons, overseas real estate definitely has its benefits. Owning a house in Bali or a condo in Spain is going to be gorgeous for obvious reasons. And at the same time, international property is a class way of diversifying your portfolio as you’re spreading the risk across countries.
Even if the Australian market slows or property values dip, an overseas asset might still be going strong. Plus, some overseas markets offer lower entry prices or higher rental yields than expensive Aussie cities which means you’ve got plenty of opportunities for healthy rental income from tourists or expats.
Investing abroad also lets you tap into growth in developing markets. While Australia’s housing is among the world’s priciest, some overseas markets are much more affordable. Just remember, a rock-bottom price doesn’t guarantee a profit – a cheap home in a struggling economy might stay cheap if demand never rises. Needless to say, thorough research is essential before you buy in an unfamiliar market.
Picking Your Location (and Knowing the Rules)
You’ve obviously got to find some kind of balance between where you’d like to live and how practical it actually is to live there – from Portugal to New Zealand. So before you fall in love with a location, check the fine print: can a foreigner even buy there?
Property laws vary widely. Some countries make it easy – the USA and UK, for example, place few restrictions on foreign buyers. Others do the opposite: Iceland, for instance, only lets citizens or residents buy property, and Canada has recently barred foreign homebuyers. Always verify what foreign investment is permitted (or forbidden) in your country of choice.
New Zealand is a special case. The Kiwis restrict most foreigners from buying homes, but thanks to Trans-Tasman agreements, Australians are treated like locals when purchasing residential property. That makes NZ one of the easiest markets for Aussies to enter. And it’s naturally got a bit of that familiarity. Just don’t assume it’s cheap – New Zealand’s median property price in 2024 was actually higher than Australia’s.
In other parts of the world, don’t be surprised when you see how many unique and bureaucratic rules there are. Bali is a long-time favourite for Australians, but Indonesian law doesn’t allow foreigners to own freehold land.
Foreigners can only buy Bali property under leasehold or “right-to-use” arrangements – freehold titles are reserved for actual Indonesian citizens. That hasn’t stopped people from flocking in; post-pandemic, Bali’s property market has boomed since foreign buyers bought up loads of the villas in hotspots like Seminyak and Ubud.
In contrast, foreigners can buy freely throughout much of Europe, although you’ll still navigate a different legal system (often involving notaries and translated documents).
Know the local rules inside out before you commit. It’s wise to get advice from local real estate agents or buyers agents who know the language and process. Having a trusted expert on the ground can save you from costly mistakes in a foreign market.
Financing and Currency Considerations
Financing an overseas property can be trickier than getting a loan at home. Since most Australian banks won’t accept an overseas property as collateral for a mortgage, one common solution is to utilise some of the equity in your Australian home so you can fund the purchase.
On the other hand, some overseas lenders may finance your purchase, but be prepared for stricter terms. That could be larger down payments or higher interest rates for foreign borrowers.
Buying in a foreign currency also means you’ve got to worry about exchange rates. A weaker Aussie dollar can make your purchase pricier or shrink returns when you convert the rent back to AUD. You could definitely soften this impact a bit by borrowing or just keeping the funds in the local currency, but always budget a buffer for currency swings.
Handling Taxes and Legal Hurdles
It’s critical that you understand some of the tax implications and legal processes that are involved when purchasing property abroad. Many countries charge stamp duties or transfer taxes on real estate purchases, plus ongoing property taxes. Some even add surcharges for foreign buyers, so you naturally need to budget for some of these extra costs.
Then consider Australian taxes. If your overseas home is an investment property, the ATO will tax your foreign rental income just like rent from an Australian property (with credits for any tax paid overseas).
But if the property runs at a loss, you may be able to deduct it under Australia’s negative gearing rules, and any capital gain on sale will be taxed back home. In short, the tax man wants his cut whether your place is in Melbourne or Madrid.
And then on the legal side you also need to be prepared for a different buying process. You might need to:
- Hire a local lawyer or notary
- Get documents translated
- Obtain special ID numbers to buy as a foreigner
Tenant and property laws can also differ quite a lot. For example, some European cities cap rent increases and limit your returns on rental properties. So just stay aware of the local regulations so you don’t get caught off guard.
Managing Your Overseas Property
Finally, owning a home abroad means becoming a long-distance landlord or caretaker. Managing maintenance and tenants from afar is challenging – even a simple leaky pipe can turn into a major hassle when you’re thousands of kilometres away.
That’s why it’s so common to see people hire a local property manager, especially if you plan to use the home as a rental property. A good manager can handle tenants and repairs, but you’ll need to budget for their fee and trust them with your asset.
And then even with their help you could still have a bunch of random emergencies from a different time zone that you’d need to deal with.
Try to visit the property (or have someone inspect it) before you fully commit. Then after the purchase, it doesn’t hurt to visit it occasionally to ensure the home is being maintained as expected.
Stay in regular contact with your property manager or neighbours so you hear about any issues quickly.
How Upscore Can Help
One way to make your journey easier is to get your finances in order upfront. Upscore’s Finance Passport can streamline the mortgage process when you buy property abroad. It lets you use your Australian financial history to access home loan offers in multiple countries.
You can apply for non-resident mortgages online and compare rates from various lenders – all before you even hop on a plane and for free!
