Whether you’re looking for a holiday home, investment property, or a future retirement spot, Australia is a popular choice for international buyers. That’s partly due to its thriving property market, but the stable economy there helps, too.
The property buying process might seem overly complicated initially, but it can be fairly straightforward if you follow these steps:
1. Understanding Eligibility and Rules for Non-Resident Buyers
First step before looking for a property is getting more familiar with Australia’s regulations for foreign buyers – of which there are many. You need to gain approval from the Foreign Investment Review Board (FIRB) before purchasing most types of property.
The reason for this is to prove your investment is in Australia’s “best interests”, which makes it a mandatory process for all non-residents. You’ve generally got the following types of property at your disposal to purchase:
- New dwellings, which are properties that have never been sold or occupied.
- Vacant land, if you’ve got plans on building property there within four years.
- Established dwellings – you usually can’t get these as a non-resident unless you plan on redeveloping them.
FIRB Approval Process
You need that FIRB approval before you can buy any property in Australia, as it’s illegal to sign any contracts without it. Getting it usually involves a one-time application fee, which can vary depending on the property’s price. Bear in mind it might take a few weeks before you get approved, so factor this into your buying timeline.
2. Financing Your Australian Property as a Non-Resident
It’s definitely possible to secure financing as a non-resident buyer, but not all Aussie banks will give you a loan. Banks are usually going to assess you based on your foreign income, considering up to 70-80% of it when determining your eligibility for a loan.
Find a lender
Since not all lenders work with non-residents, you need to research which banks and lending institutions will. Australian banks like Commonwealth Bank and Westpac are usually good for this.
Down payment requirements
Non-residents need to pay higher down payments than Aussie citizens, which is usually between 20-30% of the property value.
Documentation
Be prepared for a thorough review process, as lenders usually require documentation of the following:
- Your overseas income.
- Tax returns.
- Proof of savings.
- Potentially even credit checks in your home country.
3. Budgeting for Additional Costs
The property price is clearly the largest cost you’ll pay, but there are a range of additional costs you also need to budget for when buying a house in Australia.
FIRB application fee
FIRB fees start at around AUD 6350, but that’s just if the property is under AUD 1 million. It can increase significantly for higher property values.
Stamp duty
This is one of the biggest fees in property transactions. It’s based on the property’s value although it varies from state to state. Some states might even add a surcharge for non-resident buyers.
Legal fees
Budget for a lawyer or conveyancer so you know all the contracts and legal aspects are being handled properly.
Property inspections and surveys
These are how you know the property’s condition is okay, and they’re highly recommended for older properties in particular.
4. Selecting the Right Property
Once you’ve got a budget in mind and know your requirements, we can start searching for a property. Just ensure you do the following at this stage:
- Research locations.
- Understand market trends.
- Consider long-term property value.
Most foreign buyers go for cities like Sydney, Melbourne, or the Gold Coast. However, if you’re undecided, there are a few tips you can follow to make the search easier:
Research the neighbourhood
Look for factors such as:
- Local infrastructure.
- Public transportation.
- Schools.
- Employment opportunities, if you’re planning on renting the property out.
Consider property type
New dwellings are by far the easiest properties for non-residents to purchase. Remember that you need to start development within four years if you want to buy vacant land.
Use a local real estate agent
If you’re not able to visit Australia often, you’ll want an agent who properly understands the market and local regulations.
5. Making an Offer and Signing the Contract
When you’ve found the right property, you can now make an offer! Property sales in Australia usually happen either by private treaty (negotiated sale) or by auction.
Just be prepared to bid confidently if you’re buying through auction – these are common in many parts of Australia and can move quickly.
Steps in Making an Offer:
- Tell the real estate agent that you’re interested in the property.
- If it’s a private sale, you can then negotiate the price with the seller.
- If the offer gets accepted, your agent will provide a contract of sale that outlines all the details.
We’d recommend having a lawyer at hand to review the contract before you sign. If FIRB approval is required, which it likely will be, make sure you include it as a conditional clause in the contract.
6. Settlement and Transfer Process
Settlement is the process of finalising the property transaction. In Australia, this typically occurs 30-90 days after the contract is signed, depending on the terms.
Settlement period
This is the time when both parties have a chance to fulfil all the contract conditions. For non-residents like yourself, this includes things like:
- Receiving FIRB approval.
- Arranging financing.
- Transferring funds to an Australian bank account if needed.
Final property inspection
Just before settlement, you’ll typically have an opportunity to conduct one last inspection so you can confirm everything looks as it should.
Funds transfer and registration
Come settlement day, your bank or lawyer transfers the final amount to the seller’s bank – the title deed will then be transferred to your name!
7. Managing Your Investment: Renting and Taxes
After purchasing, there’s a chance you may decide to rent out the property. Ignore this part if it’s your primary home, but if it’s an investment property, you’ll be glad to know non-residents can rent their property out.
However, rental income in Australia is taxable, so there are some key points worth understanding about renting and taxes.
Hiring a property manager
Having a local property manager can be key for the following:
- Finding tenants.
- Managing rent collection.
- Handling maintenance.
This is obviously another expense you’ll have, but it’s worth it if you don’t plan on living in Australia.
Tax obligations
Since rental income earned in Australia is taxable, you’ll have to file an Australian tax return. The tax rate you’ll be given depends on a few factors, which are:
- The nature of the property (investment or primary home).
- Your home country’s tax treaty with Australia.
- Any deductions you may be eligible for (like property management fees or maintenance costs).
Capital gains tax (CGT)
If you decide to sell your property, you need to be wary of Australia’s capital gains tax. This applies to all non-residents and can have a major impact on your investment returns.
Conclusion
If you’re interested in purchasing property in Australia – whether it’s a second home, investment property, or a primary residence – consider Upscore to help secure a mortgage! Our Finance Passport lets you connect multiple lenders, so you can be confident knowing that you’ll find the best possible mortgage terms. Get started today and explore your options!
