| Australia
Property Buying Process and Investment Facts |
| By Rhiannon
Williamson |
| September
2006
The property
buying process in Australia is relatively straightforward and foreign investors
are permitted to own real estate in Australia as long as the land or property
for sale has been approved for sale to overseas buyers by the Foreign Investment
Review Board. 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. |
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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.
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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. |
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| 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. |
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| 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. |
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| 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 |
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| 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. |
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Article
Index ~ Australia
Index ~ |
