Income and capital gains derived from property owned in Australia has to be reported to the Australian taxation authorities but there are certain incentives in place for overseas property investors to reduce or negate their taxation liability. 

In general the first stage of the property buying process in Australia is to source suitable real estate or land for sale that suits the particular requirements of the investor.  It is essential to ensure that any particular property the investor is interested in has Foreign Investment Review Board approval as previously stated, and then it is possible to make a move on that real estate either by making a formal offer to purchase or attending an auction and bidding. 

Especially in certain parts of Australia it makes sense to have a full survey done on any resale properties that you are interested in because buildings can be particularly susceptible to problems with damp, termite infestation as well as a number of other unpleasant issues.  The Housing Industry Association or Archicentre both offer a survey review service for a fee and there are also many private firms offering the service as well on a region by region basis. 

If you’re applying locally for finance to purchase property in Australia many lenders require a survey to be carried out to their satisfaction before they will actually lend the money.  However before getting to this stage a buyer who requires finance to purchase property should speak to either a domestic or international lender to determine exactly how much finance can be borrowed.  There is no point in finding ideal investment properties in Australia if you cannot afford to buy them! 

With provisional finance terms agreed it is possible to make an offer to purchase a property or bid for it at auction.  If an investor takes the latter route they should have up to 10% of the purchase price readily available on the day of the auction for the securing deposit should their bid be successful.  Those who choose to use the services of a real estate agent in Australia to find suitable investment properties should make sure the agent is a member of the Real Estate Institute of Australia.  The REIA is the national professional association for the real estate industry and about 80% of all estate agents in Australia are members of the organization and are bound by their practice guidelines. 

An Australian real estate agent will take down your property or land requirements and then contact you when anything suitable comes to the market.  If you are in Australia you can visit the properties, alternatively you can employ independent representation to view, review and survey investment properties for you.  Once you have found a suitable investment property you can put in an offer for it whether it is going to auction or not as sometimes a buyer can purchase pre-auction if the price offered is right. 

Making an offer is not legally binding and your offer may not be accepted.  If you wish to secure a particular property you may have to negotiate with the vendor.  Once an offer has been made and accepted the conveyancing process begins and usually investors choose to employ independent legal representation on the ground in Australia to handle all the paperwork associated with the property buying process in Australia. 

The final step in the entire process is signing the contract to purchase, the contract should include all conditions of the sale and this contract is legally binding so an overseas investor should not sign anything that they are not 100% comfortable with and if English is not their first language it is sensible to have the contract translated into the investor’s mother tongue for review and consideration before they are asked to sign the purchase contract. 

In addition to the circa 10% deposit that is required to secure purchase there are additional fees and costs an overseas property buyer will have to pay when purchasing investment property in Australia and these vary from state to state but generally include legal fees, stamp duty on both the transfer of the land or property and on any mortgage too, mortgage application fees, insurances and what are known as ‘adjustments’ which include rates, council taxes, water fees etc. 

As previously stated there are ways that an overseas or offshore property investor can legitimately save tax on property purchase in Australia - from capital gains tax to stamp duty - and it is wise to seek the guidance and advice of a property taxation expert.  Such an expert will be able to advise you on which expenses are tax deductible and how depreciation, building write-off and borrowing expenses can all be used to reduce an investor’s property related Australian taxation liability. 

Australia Property Investment Facts

Many people question whether property investment in Australia remains a profitable possibility seeing as the real estate sector in Australia has been one of the most positively affected markets during the latest worldwide property boom. 

As house prices across the country are now at record highs in relation to income levels in Australia this has made property ownership a less achievable goal in real terms for many Australians, this has pushed up demand for rental accommodation so far that a rental crisis is now looming in many major Australian cities - thus creating a ripe market for the property investor seeking immediate income and long term growth. 

A recent report in The Economist magazine highlighted the findings of many global forecasters who speculate that because the Australian property market in the major cities of Sydney, Melbourne, Brisbane, Perth and Adelaide has expanded so quickly and so far, real estate is now over priced and due a correction because in real terms property has become unaffordable to the local consumer.

Supporting these findings are the Housing Industry Association of Australia’s own conclusions that the residential real estate market in Australia is due an orderly short term slowdown until 2007.  In the interim the HIA’s Chief Economist has introduced a new issue into the equation and that relates to the fact that many major Australian cities beginning with Sydney are facing a rental accommodation crisis.  If demand for rental accommodation in Sydney continues at its current high level and approval for new property developments in the city remain at their current low level, the city will face a critical demand/supply situation by 2007 with other cities hot on Sydney’s heals according to the Housing Industry Association. 

From these findings there are two conclusions that can be drawn by a property investor.  Firstly rental prices will increase in all the major Australian cities making any investment made today into a buy to let property potentially immediately profitable; and secondly, property purchased now will be in demand from a resale point of view in the medium to long term and because the Australian market has proved so popular for so long there is no reason to suspect that this situation will change. 

So, in answer to the initial question posed about whether property investment in Australia remains a profitable possibility or not, the answer is most definitely yes!  In a bear market a property investor can still profit if he purchases carefully.