7 Essential Advice for Foreign Investors Purchasing Real Estate in Australia
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Revised: 31 Jul, 2024
Non-resident lending policies and the Australian property market have undergone several changes in the last two years.
Australians residing abroad and foreigners might find it challenging to navigate and avoid the pitfalls that present themselves to overseas borrowers.
This article provides seven critical tips for international property buyers.
Avoid pre-construction purchases
Investing in a property before its construction might seem imprudent.
Investors are drawn to such purchases due to the potential increase in property value by the time of settlement.
However, if the valuation decreases, you will be required to quickly raise a larger deposit or risk breaching your building contract.
Often overlooked is the fact that it can take up to 24 months for the construction of a unit, duplex, or townhouse to be completed.
Two years is a significant period, especially regarding lending policies for foreigners and expats.
Even if you have received your pre-approval, you may not receive formal approval at settlement, risking a default.
It’s usually advisable for those required by the Foreign Investment Review Board (FIRB) to buy a new property, to opt for a fully-built one.
Ensure to include a two-week cooling-off period at settlement.
Be cautious at auctions
It’s important to know that there is no cooling-off period if you purchase a property at an auction.
If you fail to qualify for a mortgage in time or at all, you cannot withdraw from the contract and risk losing your deposit.
Securing a loan from overseas is complex; hence, it is not advisable to risk a purchase via auction.
Allocate more time for finance
You might need to visit the Australian consulate in your country for legal identification.
Loan documents may need to be transported overseas, and you may be required to provide additional documents.
This will cause delays in your mortgage application.
Thus, it is recommended to negotiate for a two-week extension on the settlement date with the seller or their real estate agent.
Foreigner stamp duty surcharge might not be applicable
Media reports suggest that a stamp surcharge applies to all foreigners wishing to purchase property in Australia.
However, this might not be the case depending on the state you’re buying in, your citizenship or visa status, and your presence in the country at the time of contract exchange/settlement.
The solution is to either wait until you become a permanent resident or, if you’re purchasing with a partner, to buy in the name of the one with Australian citizenship.
Otherwise, consider buying in a state that doesn’t apply the stamp duty surcharge.
Visit the foreign citizen stamp duty page to see if the surcharge applies to you.
Country, currency, and visa: the approval balancing act
If you’re purchasing a property in Australia, you’re likely an Australian expat, an Australian permanent resident living overseas, a New Zealand citizen living overseas or in NZ, or a foreign investor without an Australian visa.
In addition, your income might not be in the same currency as your current country of residence.
Banks now look for overseas borrowers who meet the “holy trinity” of country, currency, and visa status.
Different rules, requirements, and interest rates apply to different overseas borrowers.
For instance, some banks prefer certain currencies and reject applicants from certain countries.
Some banks assess your income using Australian tax rates, while others use the typically lower taxes you’re paying overseas, significantly affecting your income assessment and borrowing power.
Non-resident lending policies change frequently and dramatically, making it beneficial to consult a specialist mortgage broker with access to multiple lenders.
Hire a specialist conveyancer
As a non-resident, you might not be familiar with Australian property laws and your rights as a buyer.
Conveyancers or solicitors participate in the legal process of transferring property ownership to the buyer.
These licensed professionals ensure you’re legally protected when signing the Contract of Sale and reaching settlement on the property.
Refer to this list of recommended conveyancers for the state you’re interested in purchasing in.
Steer clear of foreign currency loans
Although you earn an income in a non-Australian currency, we advise against foreign currency mortgages if possible.
Despite the typically lower interest rate, the significant risk arises if exchange rates fluctuate.
A decrease could require you to provide more security for your mortgage or reduce your loan to an acceptable level for the bank.
In 1992, one of Australia’s major banks, Westpac, nearly collapsed because of these loans.
Our mortgage brokers have simplified the complex process of getting approved for an overseas borrower mortgage.
Contact us on 1300 889 743 ( +61 2 9194 1700 if calling from overseas) or fill out our online assessment form to determine your loan eligibility.
7 Essential Advice for Foreign Investors Purchasing Real Estate in Australia
7 Essential Advice for Foreign Investors Purchasing Real Estate in Australia
Revised: 31 Jul, 2024
Non-resident lending policies and the Australian property market have undergone several changes in the last two years.
Australians residing abroad and foreigners might find it challenging to navigate and avoid the pitfalls that present themselves to overseas borrowers.
This article provides seven critical tips for international property buyers.
Avoid pre-construction purchases
Investing in a property before its construction might seem imprudent.
Investors are drawn to such purchases due to the potential increase in property value by the time of settlement.
However, if the valuation decreases, you will be required to quickly raise a larger deposit or risk breaching your building contract.
Often overlooked is the fact that it can take up to 24 months for the construction of a unit, duplex, or townhouse to be completed.
Two years is a significant period, especially regarding lending policies for foreigners and expats.
Even if you have received your pre-approval, you may not receive formal approval at settlement, risking a default.
It’s usually advisable for those required by the Foreign Investment Review Board (FIRB) to buy a new property, to opt for a fully-built one.
Ensure to include a two-week cooling-off period at settlement.
Be cautious at auctions
It’s important to know that there is no cooling-off period if you purchase a property at an auction.
If you fail to qualify for a mortgage in time or at all, you cannot withdraw from the contract and risk losing your deposit.
Securing a loan from overseas is complex; hence, it is not advisable to risk a purchase via auction.
Allocate more time for finance
You might need to visit the Australian consulate in your country for legal identification.
Loan documents may need to be transported overseas, and you may be required to provide additional documents.
This will cause delays in your mortgage application.
Thus, it is recommended to negotiate for a two-week extension on the settlement date with the seller or their real estate agent.
Foreigner stamp duty surcharge might not be applicable
Media reports suggest that a stamp surcharge applies to all foreigners wishing to purchase property in Australia.
However, this might not be the case depending on the state you’re buying in, your citizenship or visa status, and your presence in the country at the time of contract exchange/settlement.
The solution is to either wait until you become a permanent resident or, if you’re purchasing with a partner, to buy in the name of the one with Australian citizenship.
Otherwise, consider buying in a state that doesn’t apply the stamp duty surcharge.
Visit the foreign citizen stamp duty page to see if the surcharge applies to you.
Country, currency, and visa: the approval balancing act
If you’re purchasing a property in Australia, you’re likely an Australian expat, an Australian permanent resident living overseas, a New Zealand citizen living overseas or in NZ, or a foreign investor without an Australian visa.
In addition, your income might not be in the same currency as your current country of residence.
Banks now look for overseas borrowers who meet the “holy trinity” of country, currency, and visa status.
Different rules, requirements, and interest rates apply to different overseas borrowers.
For instance, some banks prefer certain currencies and reject applicants from certain countries.
Some banks assess your income using Australian tax rates, while others use the typically lower taxes you’re paying overseas, significantly affecting your income assessment and borrowing power.
Non-resident lending policies change frequently and dramatically, making it beneficial to consult a specialist mortgage broker with access to multiple lenders.
Hire a specialist conveyancer
As a non-resident, you might not be familiar with Australian property laws and your rights as a buyer.
Conveyancers or solicitors participate in the legal process of transferring property ownership to the buyer.
These licensed professionals ensure you’re legally protected when signing the Contract of Sale and reaching settlement on the property.
Refer to this list of recommended conveyancers for the state you’re interested in purchasing in.
Steer clear of foreign currency loans
Although you earn an income in a non-Australian currency, we advise against foreign currency mortgages if possible.
Despite the typically lower interest rate, the significant risk arises if exchange rates fluctuate.
A decrease could require you to provide more security for your mortgage or reduce your loan to an acceptable level for the bank.
In 1992, one of Australia’s major banks, Westpac, nearly collapsed because of these loans.
Our mortgage brokers have simplified the complex process of getting approved for an overseas borrower mortgage.
Contact us on 1300 889 743 ( +61 2 9194 1700 if calling from overseas) or fill out our online assessment form to determine your loan eligibility.
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