Many investors are choosing to purchase their investments “off the plan”. In Australia buying “off plan” usually requires 10% of the purchase price as a cash deposit, this should sit in a solicitors trust account and not be accessible by the developer until project completion.  Purchasers need to check their contracts prior to signing to ensure this is the case.  There is then no more to pay until the project is fully complete and ready to occupy.

This practice allows investors to get involved in a project early on and lock in the current price.  In the hope that by the time the project completes it will have already had some capital growth.

The “off plan” opportunity is particularly advantageous when purchasing in a location that is currently at the bottom of the property cycle.

AUSTRALIAN MORTGAGES:
Some international investors are able to use their local lenders and those lenders will use the Australian property as security.  However, many investors require a loan from an Australian lender. Australia has many bank and non bank lenders and many will lend to international investors.

Lenders will generally take rental income (or projected rental income for new projects) in to account.  However most will also require evidence of other income that the purchaser has.

Most lenders will lend to a maximum 80% of the value of the property.  Generally lenders prefer property that is above 50sqm internally and if below will generally still provide funds but often not up to 80%.  Some lenders will lend up to 60% without any proof of other income.

Loan products and rates are generally the same as those available for local investors.  Loans are generally available for up to 30 years and are available on a principle and interest or interest only basis.  Variable interest rates are currently around 6.8% and 3 year fixed rates are currently around 6.7%.

THE GENERAL PURCHASING PROCESS:

Most projects require an initial holding deposit once you have selected the particular property that you intend to purchase.  This holding deposit is usually between AUD$1,000 & $5,000, is usually fully refundable should you have a change of mind prior to signing contracts, and is usually held in a trust account.

Once a holding deposit is received the vendor’s solicitor will prepare a contract of sale. This is usually a few days after the holding deposit has been sent. 

We strongly suggest to all of our clients that they use the services of a local Australian solicitor who is independent of the developer and the developer’s solicitor and who solely represents the purchaser. It is important to have legal representation in the geographic area in which you are purchasing to ensure that the particular legal requirements for that locality are being met.

The contract, once prepared is sent to the purchaser’s solicitor.  They in turn review the contract, suggest and negotiate any changes that they feel are in your best interests and forward the contract to you, with their covering notes.

The general time frame that most of our developers agree to (for off the plan projects) for our international purchasers is to allow 21 days from contract issue to have contracts signed and returned and up to a further 21 days to transfer a 10% deposit.

Once the contract has been signed by the purchaser and the vendor (with no outstanding conditions) and the 10% deposit has been paid it is considered to be “unconditional”.  This 10% is generally held in a trust account by the developer’s solicitor.  It is important to ensure that the 10% is held in trust and is not available to the vendor until the project is complete.  This will be specified in the contract.

Several months prior to settlement your solicitor will contact you to prepare for settlement.  It is important at this time to:

• Organise a pre settlement inspection.  You can do this yourself, though we suggest that in addition you use the services of an independent builder to inspect your property on your behalf.  This service is readily available and at a cost of under AUD$400 to inspect, report and then re inspect after any defects have been fixed it offers excellent value to protect your new asset.
• Organise an Australian bank account.  If you are borrowing funds in Australia you can organise this with the same lender.  In any case you will require a local account to have the rent paid in to.
• Organise a local property management agency to manage your investment.  Some investments already have this facility in place, such as serviced apartments. 
• Organise finance.  You should have already spoken with a finance company or a local Australian mortgage broker to ensure that you can obtain finance.  Now is the time to actually organise it to ensure that funds will be available as soon as your property is complete.

TYPICAL PURCHASING COSTS: - As a general guide you should allow for the following costs at settlement:

• Legal fees: AUD$1,00 to $1,500
• Stamp Duty: This is a state based tax and varies depending on property price.  An AUD$400,000 property, purchased in:
• Sydney would have stamp duty of around AUD$13,500
• Melbourne would have stamp duty of around AUD$19,500
• Brisbane would have stamp duty of around AUD$12,500

• Loan application (if borrowing funds): AUD$600
• Loan stamp duty (if borrowing): 0.4% of the loan amount.
• Pre settlement inspection: AUD$400
• Incidental costs: say $1,000

Obviously investors need to be aware that exchange rate variations can lead to potential gain or loss.  In general, compared to other similar developed countries the AUD$ is weaker, this plus the fact that Australian prices are still relatively low compared to other developed countries mean that you can purchase far more for your money in Australia than say in New York or London.

In March 2006, AUD$1 was worth around US$ 0.732, EURO$ 0.615, GBP $0.423

Sydney, Melbourne & Brisbane New Release Projects Summary:

As we are at the bottom of the market in these 3 locations, we are often able, for a limited time, to secure some excellent privileges on specific properties. These often range from cash discounts, to rental guarantees and other benefits, please send us an email today to see what is currently available.

Current projects include:

Sydney:

• A growth location just a 20 minute drive from Sydney city, close to beaches and the airport
• Stage one of a multi stage project
• Completion 2008
• Great mix of 1, 2 & 3 bedroom apartments, many with city and water views.

Melbourne: Two new release projects:

Number One:

• A landmark project in a premium Melbourne location, just 2.5kms from the city. 
• 2008 completion
• 2 year rental guarantee and massive stamp duty savings.
• A large proportion of owner occupiers, large floor plans, many apartments with city views.

Number Two: 

• Located in Malvern (just 8kms from the city), a very prestigious location that has extremely limited supply of current and future stock.
• Low rise development
• 2008 completion and 12 month rental guarantee
• Massive stamp duty savings. 
• Purchase one of the few apartments in a suburb that has predominately multi million dollar houses.

Brisbane:

• This project is on the riverfront (city or river views from most apartments)
• A 20 minute walk from the city
• The location that is undergoing a substantial urban renewal program
• The project will be predominately owner occupied, with many apartments priced in excess of $1mil.
• Completion 2008, 12 month rental guarantee.