Guide to Property in Australia
Foreign property buyers are permitted to own property in Australia provided the land or property for sale has been approved for sale to overseas buyers by the Foreign Investment Review Board. Check out their website for details of how to apply: - http://www.firb.gov.au/.
Property in Australia is wide ranging due to the sheer magnitude of the country. Home buyers in Australia who are looking for a buoyant market in which to invest are looking at various areas where the local economy is growing and the job market is strong, bringing with it a healthy supply of tenants for rentals as well as home purchasers. Due to the relatively high price of property for the average Australian, purchasers looking for buy-to-let investments are finding a healthy market in which to employ this strategy.
Many property purchasers are focusing on areas such as the western coast and North Queensland where beautiful well priced properties can be still found where a sufficient infrastructure is in place and an idyllic living environment can be enjoyed.
Propertyshowrooms.com and Property in Australia
Australian real estate offers a promising opportunity for international property investors and holiday home buyers alike. Australia has so much to offer visitors and boasts beautiful natural wonders, including superb beaches, warm weather and an outdoor culture, making it a favourite destination for many northern Europeans seeking a healthier and happier lifestyle.
Purchasers are investing in new properties as well as land deals, while prices are firmly on the increase in some areas, due to the progress of various areas and their supporting infrastructures. Our land options range from smaller plots for villa construction to land on which to develop large resorts.
Buying property in Australia is relatively straightforward and follows a similar pattern to the UK in terms of home ownership.
There are two methods of buying property in Australia:
Buying at Auction
When buying at auction you will need a 10% deposit available on the day of auction. Should your bidding be successful, you will have to pay the non-refundable deposit on the spot at the auction. Therefore it is essential for you to visit the property you are interested in beforehand and be completely sure it is a property you wish to purchase, having had any surveys and searches completed prior to auction. You would also be well advised to get finance agreed in theory so that it is ready to put into place without any disappointments or complications. If you have never bought a property at auction before, it is a good idea to go to a few actions before you start your bidding.
Buying Conventionally
Once you have found the property of your dreams you will need to make an offer and perhaps negotiate with the vendor. A 10% deposit will be required to secure the purchase and a Contract of Sale is drawn up. The deposit may or may not be refundable at the vendor's/buyer’s prior agreement depending on the State in which you buy. The contract will be subject to the satisfactory completion of all inspections and searches and once these have been completed correctly, the exchange of contracts takes place and the sale process is completed.
Costs
Costs will include legal fees, mortgage arrangement fees, stamp duty and taxes and you will need to produce an additional 5% of the purchase price to cover such expenses. The exact amount can vary according to state as well as the value of the property you are purchasing. For accurate figures, you will need to speak to your local agent or lawyer.
Taxes
It is advisable to obtain professional advice about taxation issues before entering into any property transaction. There are various ways that overseas or offshore property investors can legitimately save tax and our taxation experts can help you with planning the most beneficial ways in which to do so.
There are certain main taxes applicable in purchasing Australian property, while others may also be applicable according to state:
Goods and Services Tax (GST)
GST is charged at a flat rate of 10% and is charged on the supply of goods and services, including real estate. It is essentially a value added tax as it is the consumer or end user who ultimately bears the tax.
Stamp Duty
Stamp duty is levied on a wide range of transactions, such as agreements for acquisitions of real estate, business and some marketable securities as well as leases and financing transactions. It is a state tax and is charged either at a fixed rate or on an increasing scale depending upon the value of the property.
Land Tax
This is an annual state tax based on the ownership of land and, in some states, on the usage
of land. Land tax is levied on the total unimproved value of the land at a specified date. The tax rates and thresholds vary from state to state and over time.
Surveys
It often makes sense to have a full survey done on resale properties that you are interested in purchasing because buildings can be susceptible to damp and other problems such as termite infestation. If you’re applying locally for finance to make your purchase, many lenders require a survey to be carried out to their satisfaction before they lend the money.
If you possess property in your own country and would like to borrow against this in an equity release plan, we can introduce you to an independent financial advisor who will help you raise the necessary finance.
Capital Gains Tax (CGT)
CGT in Australia is payable upon realized capital gains and it is not treated separately in its own right, but forms part of the income tax system. However, for home owners this tax is not charged as the sale of personal residential property is normally exempt from capital gains tax. Gains realized during any period in which the property was not used for personal use (eg. rental) are, however taxable.
Recent reforms to the CGT system in December 2006 have been good news for foreign residents as the range of capital gains taxable assets for foreigners has been limited. This is an attempt by the Australian government to further enhance Australia’s appeal as an attractive business environment for overseas investors.
Tax on Rental Income
Generally, any income that you receive from renting out property will be liable for income tax, so you must include it in your tax return. This income could be from renting out land or buildings, or it could be income you earn by having private lodgers or flatmates living with you.
Inheritance/Wealth Tax
Australian property does not incur inheritance taxes, although some inherited assets may have Capital Gains Tax implications for the beneficiaries.
Property Taxes
Council rates or property taxes typically fund the local governments in all States. Taxes are charged on residential, industrial and commercial properties. In addition, some States levy tax on land values.
Banking in Australia
It is only since the 1980's that foreign banks have been able to establish branches in Australia. Before this time the banking system in Australia was dominated by savings banks and trading banks. As a result, Australia historically had few banks when compared with other countries such as the United States or Hong Kong.
Savings banks paid very little interest to deposit accounts and were primarily concerned with providing mortgages to their clients. Trading banks were essentially merchant banks and closed to the general public. Due to the lack of facilities offered by banks, non-bank financial institutions (NBFI) such as building societies were established in Australia and offered better interest rates, while still remaining somewhat limited in the services they could offer.
From 1983, banks began to shed some of their restrictions and increased their credit facilities. The distinction between savings and trading banks was abolished and foreign branches of banks began to open in Australia. Today high street banks are numerous throughout the country. Branches are normally located within 20km from any Australian home and cash point machines are also widely available.
Australian Banks:
The Australia and New Zealand Banking Group The Commonwealth Bank of Australia The National Australia Bank The Westpac Banking Corporation
The most significant foreign banks with retail banking facilities in Australia are; BankWest, HSBC and Citibank Australia.
Banks are regulated by the Australian Prudential Regulatory Authority (APRA), which is responsible for the regulation of nearly the entire Australian financial industry, including insurance and superannuation enterprises.
Australian Bank Opening Hours
Today banks are effectively open for 24 hours per day, seven days a week and some 90% of customers make full use of internet electronic banking facilities to manage their transactions immediately from the comfort of home or the office.
Mortgages in Australia
The mortgage market is well developed in Australia and foreign purchasers can obtain repayment or endowment mortgages to purchase their property. These mortgages cover up to 80% of the valuation or purchase price (whichever is lower) and are available for a period of between 5 and 30 years, up to a maximum age of 70. Loans are available at a minimum level of £50,000 (at 80% of the valuation). Currency can be in Australian Dollars, Sterling or US Dollars.
Non-status/self-certification mortgage facilities are not available in Australia, therefore all loans need to be supported by a minimum of proof of income.
Documents Required:
If you are employed, you will need to produce your last three months pay slips, P60/employers reference and your last 6 months personal bank statements.
If you are self-employed you will need copies of your Audited Accounts together with your last 12 months business, and 6 months personal bank statements.
Each lender has a slightly different approach in assessing the personal income of applicants and establishing the maximum loan to be made available.
Australian lenders only take into account approximately 70% of any proposed rental income that you could earn on your property when assessing your mortgage application. Your loan will be based on your personal (or joint) 'gross' pay and for you to be considered by the lenders in Australia, your total outgoings must not exceed 35% of your gross monthly income. For example, if your total gross monthly income is £2,000, your total outgoings must not exceed £700: In order to be considered, you must have £1,300 per month available for personal spending.
Typical Interest Rates (2018)
Variable rate:
5.05% p.a.
Fixed rate:
Term
Rate p.a.
1 year
4.36%
2 years
4.29%
3 years
4.39%
5 years
4.85%
Interest Only Mortgages are widely available in Australia and are on offer for 5 or even 10 year periods.
Commercial Mortgages also allow investors the option to choose between fixed or variable rates of interest, each with the option of interest-only repayments. This facility may also be combined with a line of credit to enable instant access to equity within your property.
If you have property in your own country and would like to borrow against this in an equity release plan, we can introduce you to independent financial advisors who can help you raise the necessary finance.
Why should I choose Australia?
The main reasons for choosing Australia for your property purchase are likely to be based on lifestyle. An excellent climate and healthy, outdoor activities continue to attract families wishing to relocate, as well as tourists. Australia boasts an irresistible variety of natural beauty, from superb unspoiled beaches, tropical rain forests to rugged mountains and deserts.
In certain areas of Australia, although prices are high, investment potential is strong, boasting returns of some 30% or more in regions such as the Western Coast and North Queensland. Meanwhile, in the city rental demand is currently high for both commercial and residential properties, creating a healthy market for a buy-to-let investment. Finally, a favourable Sterling exchange rate, allows you to buy a lot more for your money in Australia.
What is the economic and political situation?
Australia’s economic growth rates are higher than in most OECD countries and beat those of the UK and the USA. Australia’s economy represents a low degree of risk, while it enjoys a consistently strong GDP growth, stable interest rates, rising exchange rates, relatively high levels of employment and a low rate of inflation. At around 5%, unemployment in the main cities is relatively low. While the population grows and incomes rise, the demand for housing now outpaces supply, causing property prices to continue rising.
Politically, Australia is a stable place in which to live. It has a constitutional monarchy and HRH Queen Elizabeth II is also the Queen of Australia. The Australian government is run along a parliamentary system with a Prime Minister who makes the majority of all executive decisions.
How do we travel to Australia?
Around 30 airlines fly to Australia from the UK, including Quantas, BA and Malaysia Airlines, Singapore Airlines, Emirates (via Dubai), Royal Brunei and Thai Airways Prices will be high at Christmas so you will need to book your flight well in advance.
International airports in Australia are at Sydney, Melbourne, Brisbane, Adelaide, Perth, Darwin, Cairns and Hobart. The sheer expanse of Australia makes internal flights a usual option for travelers within the country. National airlines in Australia include Quantas, Australian Airlines, Macair, National Jet, Rex Regional Express, Tasair and Virgin Blue. Low cost flights connect with national airports at Brisbane, Broome, Cairns, Canberra, Darwin, Melbourne, Perth and Sydney.
What is the direct flying time from UK to Australia?
Flight time is approximately 18 hours from Europe and normally includes a refueling stop in Singapore or Bangkok.
Is a visa required to enter Australia?
Yes everyone traveling to Australia (except New Zealanders) requires a visa. The visa application procedure may vary depending on the length and purpose of your visit. The three visas most commonly applied for are the short stay tourist/business visa, long stay tourist visa and finally the working holiday visa.
You will need to apply to your nearest Embassy.