Australia is a popular choice when people from places like Hong Kong, Singapore and China look for properties overseas.
The Australian property market has grown remarkably fast over the years and prices have reached unsustainable levels in places like Sydney and Melbourne. Not surprisingly, many locals move to smaller cities.
Australia will continue to attract foreign real estate buyers over the years, might it be future retirees or people who want to send their kids overseas to study.
Before you buy property here, it’s important that you get your feet wet and learn about local buying regulations, property taxes, the best places to buy, and more.
In this article, I explain the details you need to know when buying real estate as a foreigner in Australia.
- The Australian Property Market in Previous Years
- The process when buying a property in Australia
- What is a temporary resident in Australia?
- Which properties can I buy as a non-resident?
- What is a ‘dwelling exemption certificate’?
- How do I apply for a foreign investment approval?
- What is FIRB?
- Property Taxes in Australia
The Australian Property Market in Previous Years
The US and other European countries suffered hard from the subprime crash in 2008, seeing house prices plummeting. Surprisingly, the Australian property market wasn’t affected as much.
Australian construction companies put projects on hold due to the economic impact that followed. With a lower supply of properties, the demand helped to keep property prices at a comparably sustainable level.
Not to forget, Australia was a big exporter of coal to China at that time, which helped to drive the economy.
Real estate prices have multi-folded in Australia in the past decades, something that’s the result of its strong economy and high influx of immigrants from other Asian countries.
Not to forget, the printing of new money through Australia’s reserve banking system has made it easier to borrow money at lower costs, which naturally drives up property prices.
If you believe that Australian real estate is too expensive but still interested to invest in the country, you should check my separate article about REIT investments in Australia.
Process when Buying Property in Australia
It’s important that you understand why you want to invest in Australia and chose a location based on your budget and investment goals.
Will the property be used to house your children when they move to Australia for studies? Do you seek maximum capital gains?
Maybe you simply want a second home where you can store some of your savings and where you can spend a couple of months every year.
Let’s review the process when buying real estate in Australia.
1. Create your goals and make a budget
If the purpose of your investment is to let your children study in Australia, do research about local universities online and make a list.
Search for university rankings and review websites. Do the universities have good records? Older universities are often prestigious, even the ones in smaller cities.
Ask your friends and relatives if they know anyone that has children studying in Australia and ask them for advice. Many times, such information spreads word of mouth.
Don’t ignore that properties close to universities often appreciate more in value, as many other persons look for overseas education for their children.
What should I consider before buying a property in Australia?
Some questions you should ask yourself before you start looking for a property are:
- How high is my budget?
- How much should I expect in rent if I rent out the property?
- How high are the rents for other properties in the neighborhood?
- How much can the property potentially appreciate in value in the coming years?
- How can I manage maintenance? Can someone else do it for me when I’m not there?
Keep in mind that certain property types aren’t available to you if you’re a non-resident buyer. At the same time, some investments require approval from the FIRB first.
2. Finding a real estate agent or buyer’s agent
I recommend you to contact a real estate agent that has a good knowledge of the local price levels and the best locations in your chosen area.
If you’re Chinese and want to avoid problems with communication, you should consider hiring an agent that can speak both fluent English and fluent Mandarin or Cantonese (if needed).
There are plenty of people from mainland China that reside in Australia, so you won’t have problems finding agents who speak these languages.
What should I ask my real estate agent?
Prepare questions to avoid any future problems, some examples are:
- What was the selling price for the property the last time?
- What’s the area’s annual council rates? (Council rates are used to bring revenue for services and infrastructure in communities)
- What are the strata levies and pending levies on the property?
A levy is another word for a fee in the real estate business, owners of strata-titled properties are charged with these levies (fees) to cover costs for maintenance of the common areas for example, such as for the gym and the swimming pool
- Has the property owner done a pest or building inspection recently? You don’t want to end up with sanitary issues shortly after your purchase
- Does the agent provide the sales contract?
Do I need to visit Australia to view the property?
If you can’t visit Australia to check the property (which I still recommend) you can hire a buyer’s agent that will check the property on your behalf.
The buyer’s agent can help you to find interesting properties and also negotiate the offer for you. In that case, you don’t need to talk directly to the real estate agency.
Before you choose a buyer’s agent, make sure that he or she is licensed to avoid future problems.
3. Finding a solicitor
The solicitor will help you to transfer the property from the seller and to review the contract.
Make sure that the solicitor has a license in the state. Check with any international bank, such as HSBC, to see if they help you to find a solicitor if needed.
In fact, it can be beneficial to work with a solicitor that works with the bank, in case you plan to apply for a mortgage.
What should I ask my solicitor?
Some questions you can ask the solicitor are:
- Do you have a license and are you legally qualified to help me?
- Are there any extra costs I should be aware of, that has not been shown yet?
- Will I need to pay extra money for you to prepare the sales contract? (In case the solicitor is responsible to do this)
4. Getting a mortgage as a non-resident foreigner
The same as it goes in New Zealand, Australian banks have become more restrictive when offering bank loans to foreigners. That wasn’t the case some years ago when banks were way more generous with bank loans.
If you apply for a loan, you need to pay fees to set up the loan, stamp duty, and any other fees linked to the loan application.
The stamp duty can easily be calculated with HSBC’s online calculator.
A recommendation from my side is to make a phone call to HSBC’s local branches in Australia and ask for details regarding the loans offered, and what the different conditions are.
5. Preparing an offer
If you’ve done thorough research on the area where you plan to buy, it’s time to come up with an offer. Your agent should be able to help you with this step of the process as well.
You can make one of two different kinds of offers: A conditional offer or an unconditional offer. A conditional offer is more common and a binding offer, it includes a list with certain requirements to be met.
After you have submitted a conditional offer, you cannot pull out from the deal unless the seller doesn’t meet any of the conditions stated.
Unconditional offers are less common and don’t include any conditions. If the seller accepts your offer, you need to proceed with the purchase of the property.
6. Submission of the Sales & Buying contract
If you’ve made it this far, congratulations! You’ll now receive a sales/buying contract with two copies, to be signed and submitted between you and the seller.
7. Paying the deposit for the property
Usually, foreigners need to pay a deposit ranging from AUD 2,000 to 10% of the property price. You can make the transaction through HSBC or any other bank that you choose.
8. Finalizing your mortgage application
When the bank has helped you with the valuation and you’ve paid the deposit, the bank will prepare the loan documents.
You’ll also need insurance for your property, the bank can help you to get a quote for the insurance.
Finally, the bank will send a contract of the loan, a so-called Letter of Offer. Before you sign the document, let your solicitor have a look at it to avoid any problems later.
9. The property settlement
The same day as you get ownership of the property, you’ll need to pay the remaining cost of the property. This date is called the date of settlement.
2 weeks before the settlement date, your solicitor will make a ‘Transfer of Land document’ to be signed by you.
When you’ve signed the document, the solicitor will bring the document to your bank and they will in turn register it at the State/Territory Title’s office. After, the property will be transferred in your name.
When the settlement is done, the seller’s solicitors will inform your real estate agent and tell them to give you the keys to the property.
Finally, you’ll be contacted by your solicitor to confirm that the settlement is managed.
You’ll also receive a Statement of Adjustment that shows how the funds have been distributed between all parties.
What is a temporary resident in Australia?
Foreigners are considered temporary residents if they have a temporary visa and plan to stay in Australia for at least 1 year. Therefore, temporary residents and students often fall under the same category when buying property.
A temporary resident might also be a person that is waiting for his or her permanent visa application to be issued. During that period, a bridging visa is normally issued.
Property Types Available to Non-Residents & Temporary Residents
Below I have listed the different property types that you can buy as a non-resident or temporary resident.
1. New properties (Off-plan)
If the property is off-the-plan or recently finished, it’s considered new. In addition, no one should have lived in the property for more than 1 year and the property should not have been resold.
New properties bring many benefits to foreigners as it’s easier for temporary and nonresidents to buy them.
The Australian Government primarily wants foreigners to buy new properties as these create more construction jobs domestically and boost the economy in general.
It also helps to increase revenue from taxes and fees needed, that wouldn’t exist for established properties.
How many new properties can I buy as a foreigner?
In comparison with established properties, you can buy several new properties, at the same time as you reside in your established property, you can maximize your property ownership in this way.
Keep in mind that you’ll need to make a foreign investment application separately for each unit, you cannot apply once and buy an unlimited amount of properties.
Before you can purchase a new property, you’ll generally need to get a foreign investment approval from the FIRB (the Foreign Investment Review Board). See the section below for more information about FIRB.
Sometimes, developers hold a so-called New dwelling exemption certificate which allows foreigners to skip the application usually needed to FIRB (read below for more information about New dwelling exemption certificate).
Bear in mind that a property built on a removed established property is not considered a new property usually.
I highly recommend you to read my separate article that presents the biggest property developers in Australia.
2. A second hand / established property
An established property is the opposite of a new property – it’s been resold or had tenants for more than 1 year.
This property can be available in case you are a temporary citizen and assure that you’ll sell the property within 3 months if you’ve decided to leave Australia.
How many established properties can I buy as a foreigner?
Foreigners can only buy 1 established property, which differs from the regulations for new properties. You’ll need to keep it as your sole usage only.
That means you cannot rent out the property or keep it as a holiday residence.
Notice that foreign students are considered temporary citizens in case they will pursue studies for 1 year or more, an established property can be a good option if you plan to study in Australia.
You are also able to buy established property if you have a (substantially big) Australian company and use it for your local employees to reside.
You’ll also need to assure that the property will be sold in case the property is empty for 6 months or more, to be granted to buy an established property as an Australian business owner.
Notice that the government has made established properties available for temporary residents with the purpose to create a bigger supply of properties for foreigners.
Foreigners might have seen a shortage of properties in case only new properties were available and the Government is fully aware of this.
3. Buying land as a foreigner in Australia
If you plan to buy land as a temporary or non-resident, you need to build a property on the land within four years.
The government introduced this regulation to avoid foreign investors pooling money in Australian land investments.
Even if you can’t finish the application within four years, exemptions can be made through applications.
Another important point worth mentioning is that vacant land requires that no previous property was built on the land. The only way to possibly get around this is to build several properties on that land, this is often called house stocking.
To buy vacant land and build your house can be a good option for the long term and will enable you to choose how your property should look like.
You might also be able to save costs as you are controlling the purchase of the materials and the workforce.
What is a ‘dwelling exemption certificate’?
If you’re lucky, you might be able to find a developer that holds a so-called dwelling exemption certificate.
The certificate allows the developer to sell new properties or near-new properties to foreign persons. In such a case, you’ll be able to skip the foreign investment approval mentioned above.
As of the time I’m writing this blog post, Australian developers can sell a maximum of 50% of the properties for foreign persons. Be sure to confirm this with the developer before you decide to buy a property with a dwelling exemption certificate.
For those who don’t know what near-new properties are, these are properties that were sold but no one ever managed to settle in.
What is FIRB?
One of FIRB’s (The Foreign Investment Review Board) main responsibility is to advise the government (and the treasurer) on the country’s Foreign Investment Policies.
For example, they work actively to make foreigners aware of investment regulations and make guidelines for foreigners that want to make (property) investments in Australia.
Even if FIRB’s approves purchases done by foreigners, it’s rarely heard of that they have rejected a purchase.
How do I apply for a foreign investment approval?
Foreigners need to make an application on the Australian Taxation Office’s website. As informed above, FIRB stands for the Foreign Investment Review Board and they grant any applications for purchasing properties.
In total, you need to fill in the following information:
- Your contact information
- The applicant’s name
- Type of application
- Information about the property (such as address and information about the title)
- A final declaration
The website is easy to navigate and includes step by step guides on how the application is done.
In case you have issues filling out the form or have any other questions, you can also call the tax office.
Generally, you will receive a reply to your application within 10 days, the maximum time needed is 30 days. The service offered is great as they highly value investments from foreigners.FIR
Property taxes in Australia
Below I’ve listed the taxes you need to pay when buying, holding, or selling a property in Australia.
Keep in mind that tax rates change continuously. It’s important that you’re up to date by reconfirming the latest information.
The stamp duty is generally set to 5% and paid by the buyer.
In New South Wales, the stamp duty will be abolished from mid-2021. Instead, the stamp duty will be replaced by an annual land tax on new property transactions.
Homebuyers will be able to choose whether they should pay one-off stamp duty or the annual property tax.
Rental income tax
The rental income tax starts at a rate of 32.5%. If you’re a non-resident foreigner, the rate starts from the first penny you make and increases up to around 37%.
Council tax (property tax)
The council tax is similar to the property tax we see in other countries. The rate is around AUD 1,300 yearly on average for Australian households.
Capital gains tax
Best Cities to Buy Property
More and more investors target investments further away from the larger cities to enjoy lower property prices.
Besides, many Asians have started to appreciate smaller cities as the primary reasons for foreign education for their children are:
- That they become fluent in English
- They get internationalized and “used” to foreign cultures and people
- To let them receive a high-class education that’s often cheaper than in their home country
I’ve personally met people in China that plan to move overseas, just to let their children get a Western education for free through the public system.
This is not something they can get in a country like Thailand.
Many times, public education in places like the UK, the US, and Hong Kong is equally good, if not better, compared to many international schools in China.
Smaller cities will outperform the bigger cities in terms of yields
And you don’t need to choose any of the big cities in Australia. There are many smaller cities to choose from, such as Gold Coast, Adelaide, Wollongong, Hobart or Canberra just to name a few.
Rents and living expenses are generally cheaper in the smaller cities, not to forget the enrollment and tuition fees.
I’m not saying that you shouldn’t go to Sydney or Melbourne, but you should consider other great alternatives that are available in Australia.
The property markets in the big cities are in bubbly phases
With some thorough analysis and planning, you can ‘kill two birds with one stone’ by making great property investments in cities that have not stagnated as much as Melbourne and Sydney.
And at the same time, you give your children a high-class education with enrollment fees that are way lower compared to these bigger cities.
Let us have a look at some of the most interesting university cities in Australia in the coming years:
Pros: Great nature, beaches, and parks. Low tuition and living costs. Perfect for persons who want to enjoy nature more than partying. The property market has not stagnated as much as in Sydney and Melbourne.
Cons: Less bustling than the other bigger cities. Not as much sunshine as in other cities. Hosts a few students.
Pros: Many students, beaches and beautiful nature. Low tuition and living costs. The property market has not stagnated as much as in Sydney and Melbourne.
Cons: Small city, lack of nightlife.
Buying property in Gold Coast
Pros: Great weather, there’s a reason why the Gold Coast has a place called Surfer’s paradise. Low tuition and living costs. The property market has not stagnated as much as in Sydney and Melbourne.
Together with Brisbane, many real estate investors predict that you should consider investing in these places.
Cons: Universities are not as good as in other cities. The city doesn’t have a real university culture.
Pros: Has the highest-ranked university in Australia, the Australian National University. Many green areas and a great student city.
Cons: A bit far away from the coast and less bustling than cities like Brisbane, Melbourne, and Sydney.
Pros: On the rise and often said to be the “right place to invest in”.
Brisbane is a cozy city that hosts many good universities, its bustling nightlife is more than enough for students that want to party all night long.
Cons: Somewhat expensive, but not as expensive as Sydney and Melbourne.
Pros: The largest city and capital of Australia, famous for its many prestigious universities.
Beautiful nature surrounding the city and a lot of parks in the city. Sydney has been the top choice for a majority of Asians in the past years.
Cons: Stagnated market and expensive property prices. Expensive living costs. You’ll probably need to look in the outskirts if you plan for less costly investments.
Pros: Top 5 on the list of the World’s best university cities says it all. Melbourne has seen a huge influx of foreign students, especially Asians, who want to enjoy this bustling city and to study at some of the best universities in Australia.
Cons: Stagnated property market. Expensive living costs. You’ll probably need to look in the outskirts if you plan for less costly investments.
Pros: Amazing beaches, great universities. Growing quickly.
Cons: Fairly expensive.
I also recommend you to read my separate interview with Amanda Gauci at Pulse Property Solutions, to learn more about buying off-plan property in Perth.
Below I’ve included frequently asked questions and my replies. If there is anything else you wonder about, feel free to write a comment below or send us a message.
Can a New Zealander buy a house in Australia?
If you’re a non-resident or a temporary resident (see above) and want to buy a rural or commercial property, you need approval from the FIRB before you can make an investment.
However, if you want to buy an urban residential property you won’t need to apply for an approval from FIRB.
What is the average cost of a house in Australia?
The median prices were as follows for houses in 2019:
- Sydney: AU$840,000
- Melbourne: AU$665,000
- Brisbane: AU$490,000
- Adelaide: AU$437,511
- Hobart: AU$420,000
- Darwin: AU$440,000
- Canberra: AU$591,000
- Perth: AU$475,000
How do I become a real estate agent in Australia?
You need to meet eligibility requirements and complete a ‘qualification and certificate of registration’ in your state or territory. You also need to get experience working under the supervision of a licensed real estate agent.
Can a US citizen buy a house in Australia?
You cannot buy existing homes as a non-resident but can buy new properties, off-the-plan apartments, and vacant land.
If you’re a non-resident foreigner and you want to buy any kind of residential property in Australia, you first need to get approval from the FIRB.