Australia's Property Investment Guide for Foreign & Hong Kong Buyers
Below is a general procedure of buying property in Australia as a non-resident. This guide is applicable to buying property in Melbourne, Sydney and Brisbane.
1. Reserve a Unit
First, select the property and unit type that you want to buy. Then, AUD$2,000 - AUD$5,000 is payable to the attorney of the developer's trust account.
2. Contract Exchange
After the cooling-off period, the foreign buyers can sign the Sales & Purchase Agreement. A licensed Australian attorney will accompany the buyer and elaborate the details on the contract. It is Australia's regulation to involve an attorney throughout the process to ensure the owner's rights.
3. Apply for Foreign Investment Review Board (FIRB)
According to the framework of Australia’s foreign investment, foreign buyers generally need to apply for foreign investment approval before purchasing residential real estate in Australia. Normally, most of the developer in Australia would have applied the Foreign Investment Review Board (FIRB) for the foreign buyers. If not, your attorney will apply for you.
4. Pay Deposit
After the buyer exchanged the contract with the developer, 10% of the purchase price is payable by the buyer to the conveyancer/solicitor of the developer's trust account.
5. Applying for Mortgage
3 months before handover, the attorney will notify the foreign buyer to apply for mortgage. The conveyancer/solicitor will work with the buyer's mortgage manager to apply for mortgage. Most of the foreign investors can apply for a 70% mortgage.
6. Property Settlement and Handover
When the project has been completed, the conveyancer/solicitor will notify the buyer to check the unit. (It can either be carried out by the conveyancer/solicitor or local surveyors). After checking the unit, the conveyancer/solicitor will confirm the handover date with the buyer. On the day of handover, the bank will release the mortgage amount to the developer. The buyer is required to transfer the 10-20% first instalment before that. When the buyer gets the key, the transaction is officially completed.
7. Rent Out the Property in Australia
When the foreign buyer has got the key, you can assign a property management company in Australia to manage your property. They can provide services such as tenant recruitment, checking and maintaining the property, paying taxes for the owner etc. The expenses will be charged directly from the rental return.
Frequently Asked Questions
Q: What is the percentage of mortgage I can apply for buying property in Australia as a foreign investor?
A: Foreign investors can apply for up to 70% mortgage in both AUD and HKD. The interest rate can be as low as 4.25% per annum in AUD and 2.2% in HKD and loan period can be 25 years. (It might varies from time to time.)
Q: Do foreign investors need to appoint a Australian mortgage broker to apply for a mortgage?
A: It is optional for the foreign investors to appoint a Australian mortgage broker. However, we do recommend that foreign investors should appoint an experienced mortgage broker in Australia in helping for mortgage application.
Q: Are there any expenses when I rent out the property in Australia as a foreign investor?
A: If you have assigned a property management company, they will normally charge 6% of the rent as rental management fee. The property owner is also required to pay for the property's management fee and maintenance fee.
Q: Are Australia's property freehold or leasehold?
A: Most of the properties in Australia are freehold. Only a few are leasehold.
Q: How much is the conveyancer/solicitor fee in general?
A: It ranges from AUD$1,000 to $4,000.
Q: Can foreign investors buy second-hand property in Australia?
A: Foreign investors can NOT buy second-hand property in Australia.
Q: How many properties in Australia can a foreign investor buy?
A: There is no limit on the number for a foreign investors to buy properties in Australia.
Q: What is Negative Gearing?
A: Negative Gearing means a rental property is said to be 'negatively geared' where the deductible expenses (including interest on the loan borrowed to finance the property) exceed the income earned from the property. In Australia, the owner can claim a deduction for your related expenses for the period your property is rented or is available for rent, which include management and maintenance costs, interest on loans, borrowing expenses, depreciation and capital works spending can be deducted over a number of years.
- Stamp Duty Tax: Stamp duty in Australia depends on the value of the property and follows a sliding scale. Stamp duty is paid by the buyer when the contract is sent to Office of State Revenue. It varies from different states in Australia. The estimated amount is around 3 - 5% of the property price. In Melbourne, there is an additional 12.5% stamp duty payable by the buyer.
|New South Wales (Sdyney)|
|DUTIABLE VALUE (AU$)||MARGINAL STAMP DUTY RATE|
|Up to 14,000||1.25%|
|30,000 - 80,000||1.5% on band over AU$27,240|
|30,000 - 80,000||1.75% on band over AU$31,800|
|80,000 - 300,000||3.5% on band over AU$84,802|
|300,000 - 1,000,000||4.5% on band over AU$318,005|
|1,000,000 - 3,000,000||5.5% on band over AU$1,060,019|
|Over 3,000,000||7% on all value over AU$3,180,057|
|DUTIABLE VALUE (AU$)||MARGINAL STAMP DUTY RATE|
|Up to 25,000||1.4%|
|25,000 - 130,000||2.4% on band over AU$26,503|
|130,000 - 440,000||5% on band over AU$137,815|
|440,000 - 550,000||6% on band over AU$466,451|
|550,000 - 960,000||6% on band over AU$583,063|
|1,000,000 - 3,000,000||5.5% on band over AU$1,060,115|
|Over 960,000||5.5% on all value over AU$1,017,711|
- Application fee for FIRB: Property price which is equals to or less than AUD$1,000.000, the application fee is AUD 5,000. For all properties over AUD$1,000.000, the application fee is AUD $10,000 per AUD$1,000.000.
- Water Bill: The landlord is usually responsible for water costs, but the bills may be passed onto the tenants if the water consumption is higher than normal. It is payable by every quarter. Starting from AUD $600.
- Municipal fees: Payable by every quarter. Ranging from AUD $800 - $1,200.
- Council rates: Council rates are a yearly cost which goes towards maintenance in the community such as developing or repairing roads, and garbage collection.
- Strata: Strata costs increase with the amenities you add to the property, such as swimming pools, and gyms. If you want to keep costs down, lower the amount of amenities.
- Maintenance: If you’ve purchased a newly-built property, the maintenance costs should be low as the buildings are new. However, you are responsible for maintenance and repair costs.
Expenses when you sell Australia's property
- Capital Gains Tax: Selling property owned less than a year will be charged for 50% of the profit amount. Selling property owned more than a year will be charged for 25% of the profit amount.