Buying Property in Australia as a Foreigner: The Ultimate Guide for Potential Buyers in 2023
Famous for its sunny beaches, picturesque views, and vibrant cities, buying Australian real estate is an increasingly attractive option for overseas investors. Its thriving economy and idyllic landscape invite foreign buyers to purchase property in the land down under.
Whether you’re an Australian expat, a foreign investor, or a temporary resident looking to become a permanent resident, we’ve got the ultimate guide on purchasing property in Australia. Before you dive into the Australian real estate market, it is essential that you thoroughly understand how everything works.
Don’t worry. We’ve put together ten steps to quickly get you closer to buying your Australian dream property as a non-resident.
Can foreigners buy property in Australia?
Yes, foreigners or non-residents can purchase Australian property. However, all sorts of rules and regulations restrict the buying process that doesn’t apply to Australian permanent residents.
Foreign nationals must apply to the Foreign Investment Review Board (FIRB) before purchasing their investment property – but we’ll get into that later.
The Australian government aims to channel foreign investment into new homes, increasing the housing supply and supporting the overall economy. While foreign investment in the housing market can create revenue (stamp duty and land tax), the main aim is to create jobs and property in Australia.
With this in mind, what type of property can foreign investors purchase?
- New buildings: Lenders usually approve new builds without any conditions.
- Vacant land: Investors will typically be approved to buy vacant land if you complete the construction process within four years.
- Established dwellings: Foreign buyers can only be approved for an established dwelling if they plan to demolish the existing structure and create more homes.
- Buying a home to live in: Temporary residents can buy homes. However, they must sell it if they leave Australia – unless they become permanent residents or citizens.
Commercial properties, on the other hand, are typically more relaxed. The FIRB only generally requires approval if the property is over $310 million.
If you’re a temporary resident, expat or foreign investor looking to buy residential real estate in Australia, it is crucial you understand the fundamentals of the approval process. Look into what you are eligible to purchase. Be careful – breaching foreign investment property laws can saddle you huge fines of as much as a few hundred thousand dollars.
How to invest in Australia as a foreigner
If you’re wondering how to invest in Australia as a foreigner, expat, or have a temporary visa, you need to consider what makes a good property purchase in Australia. A good investment in Australia may differ from other countries.
The key factor many Australian citizens consider when buying real estate is location. In such a vast country, narrowing down your dream location to one area can be challenging. However, proximity to the beach or a CBD is typically an excellent element to judge. Similarly, accessibility to schools, shops, restaurants, hospitals and public transport is also worth considering.
The location should also have a strong potential for capital growth, high demand and maximum appeal. Queensland, New South Wales, Victoria and Western Australia are the most prosperous parts of Australia to buy real estate.
Once you have settled on your location, you can start thinking about the property. What kind of home do you want? What sort of demographic?
For foreign buyers looking to invest in property in Australia, deciding where and what you want to buy is much the same as elsewhere.
However, the actual process of getting approval and obtaining a mortgage might differ. Luckily, we’ve put together ten easy steps to make your real estate purchase more manageable.
1. Organise your team of professionals
No one should get a home loan for their residential property by themselves. Foreign investors, especially, need a solid team to tackle the Australian government restrictions and hurdles. Ensure you get to know your team of professionals so that you can trust them throughout the buying process.
The professionals you need by your side are:
- Mortgage brokers: A mortgage broker acts as an intermediary between yourself and the home loan lender. Experienced mortgage brokers can make all the difference for a foreign investor buying property. They don’t need to see the property to assist with your purchase anywhere.
- Buyers’ agents: Unlike real estate agents, a buyer’s agent is independent and acts on your behalf. The seller often employs a real estate agent, meaning they don’t always have your best interests at heart. A buyer’s agent will help you research the perfect property, ensure your contract is sound, and protect you from paying too much.
- Solicitors: Seek legal advice from a solicitor. It is essential for anyone interested in an investment property to hire a solicitor. Your solicitor takes care of all the legal aspects of your property in Australia. They conduct property searches, manage ownership transfer, and supervise the contract. Your solicitor must have a license in the state where you buy your Australian property. They will also help you avoid unnecessary legal fees.
- Home inspectors: Before settling on your residential property in Australia, foreign investors will want to pay inspection fees to ensure the house is fit to buy. This is especially important if you live overseas and need help to travel to see the property yourself easily.
- Accountants: Although not a necessary addition to your team, an accountant can make your life much easier. From maintaining financial records on your behalf to helping you pay state government taxes, an accountant can save you a lot of money down the road. Please speak with your accountant about your long-term goals so that they can help you structure your finances in the best way to suit you.
A strong team of professionals by your side can save you significant amounts of time, money, and hassle when purchasing property in Australia.
2. Get your loan pre-approved
It is never too early to begin talking with your mortgage broker about your home loan. Mortgages are the primary way to finance your property purchase. Knowing the amount of money you can feasibly offer to sellers will help you conduct a more efficient property search.
A pre-approval is issued when you submit documents about your financial and personal situation. This might include payslips (or other income details), bank statements, marital certificates, current location, passports, and employment contracts.
During the pre-approval process, Australian banks will complete a thorough background check. The process should now be quick and easy when applying for formal mortgage approval since you’ll have already completed vetting.
Before applying for your home loan pre-approval, take stock of your finances. You can use a home loan calculator to determine how much you can borrow. Expats are entitled to interest-only, fixed-rate, and variable-rate loans.
We’re happy to assist any overseas buyer purchasing in Australia to find suitable options.
All you need to do then is to fill out the pre-approval form and submit it to a relevant credit provider. Lenders are often wary of offering loans to anyone other than Australian residents. Different banks will have different lending policies when it comes to foreign investors.
Potential outcomes from your home loan pre-approval application
- Declines the application: Foreign investors regularly see their loan applications fall. As a non-resident, you are at higher risk to the lender. With fluctuating exchange rates and the bank’s inability to efficiently cope with overseas customers, some lenders outright decline any foreign investors. To make this step easier, seek approval from a specialist expat broker like Odin Mortgage.
- Lends with restrictions: You might find that your loan pre-approval application comes back asking for additional information or supporting documents. Lenders often hesitate to consider foreign income when considering your loan application. You might also see that the loan amount is restricted; banks may lend up to 80% of the purchase price. However, overseas investors may not even get this amount.
- Special lending parameters: This is a rare response from lenders. Special lending parameters mean that the bank offers you a loan without or with minimal restrictions. These banks have special credit teams who are experts in overseas loan applications.
Remember, your home loan application might incur additional expenses beyond the purchase price. Reserving an extra 5% of the property value to pay for other services is usually a good idea. These might include loan establishment fees, legal fees, foreign citizen stamp duty, FIRB approval fees, property inspection fees and buyer’s agent fees.
In addition, the usual building and maintenance costs build up with the purchase of any new property.
3. Confirm you qualify with the Foreign Investment Review Board
The Foreign Investment Review Board (FIRB) is part of the Australian government that reviews foreign investment applications to purchase property in Australia. A FIRB approval is necessary for temporary residents and overseas investors.
Application fees are pretty expensive for temporary residents and overseas investors. For property prices under a million Australian dollars, the application fee is $13,200. There is a maximum fee cap of $1,045,000.
However, as expensive as this step is, ensure you don’t skip it. You may need to pay a penalty of up to $166,500 or three years in prison for not confirming you qualify with the FIRB.
Please keep in mind that for Australian citizens living abroad, New Zealand citizens, or if you have a permanent Australian visa or an Australian spouse, you are exempt from paying an application fee for FIRB approval. Similarly, if you’re a foreign national and inherit the property or are awarded it by court order or in a divorce settlement, you do not need to seek approval from the FIRB.
4. Find the right property
Now that you know how much you can borrow, the legal costs, and whether you qualify to buy real estate in Australia, the next step is to find your dream home. It is better to base your property search on the home loan options lenders offer.
Enlisting the help of a buyer’s agent is an excellent way for people living overseas to find the property they want. Buyer’s agents will provide you with a list of homes that suit your requirements for you to choose from. Real estate websites are also good places to start if you decide not to go down this path.
Of course, the kind of property or plot of land you want to buy is down to the purpose you envision for it. If you’re investing for yourself, you can pick an idyllic home anywhere.
Want to invest in a rental property? Understanding what a renter is looking for in a property is crucial. For example, the location is vital if you’re renting to joint tenants. Likely, they will want to be near a school if they are starting a family. Also, consider the prosperity of rental properties in your buying area.
The weekly rent should cover the cost of professional managing agents and a property manager, the fees of conducting regular property inspections, and the mortgage.
Most property managers charge between 5% to 12% of the weekly rent, although it varies between states. Sydney and Melbourne offer the most competitive rates.
5. Seek FIRB approval
The best way to get approved by the FIRB is to let your solicitor handle your application and submit your request for foreign investment approval. In the meantime, there are several steps you can take to get ahead and make the process flow more smoothly, which include:
- Visiting the FIRB website and reading their guidelines thoroughly to ensure you know everything you need about the approval process.
- Checking out the Australian Tax Office website to start the process.
- Filling out the application form. Make sure to mention all necessary legal details and any reference numbers from previous FIRB applications.
- Listing the address and property details of the property you intend to purchase.
- Thoroughly checking the details you have provided and ensuring all your information is correct. Incorrect or misinformation might cause delays and additional one-off fees.
- Reading and signing the declaration form.
- Submitting the form alongside the application fee. The turnaround time between submission of the application and response is typically within 30 days.
Reviews may take up to six months to process. The review process will begin once you have paid the full application fee. If you are required to submit more information, the review period might be longer.
6. Negotiate the purchase price
Australian house prices essentially differ across the country. Different cities and states have varying purchase prices. Other factors that affect property value include the type of structure and its location in relation to urban areas and up-and-coming neighbourhoods.
Most properties are sold for about 5-10% below the asking price.
Sellers are more likely to be impressed with your offer if you can knowledgeably tell them how much you can pay. This is why discussing your loan options with your mortgage broker and lender before searching for your dream home is essential.
House prices in Australia declined by 5.3% over 2022. While this might be a scary prospect when you fork out $1.25 million (the average Australian house price according to Forbes), it is good news that real estate is a substantial investment as house prices will likely keep rising.
Sydney is the most expensive city, with the average home costing $1.27 million. At the slightly lower end of the spectrum, the median price of a house in Perth is $540,000.
Utilise the support of your professional team during negotiations. The home inspector will help you know how much the home property is worth. The seller will ask you to sign a contract after you have agreed on a price. Ensure your solicitor thoroughly checks the contract before you mark it.
7. Obtain formal mortgage approval
If you’ve already been pre-approved for a home loan, obtaining formal approval for your loan should be relatively straightforward. It is also known as unconditional approval. Your mortgage broker will contact the lender, and they will send you a formal mortgage approval and loan offer documents.
8. Exchange contracts
Your solicitor conducts this step. Your legal representation will swap signed agreements with the seller’s solicitor, and you must pay your deposit. You would have negotiated the size of your deposit with your lender during the pre-approval stage.
When all parties exchange the contracts, the agreement is now legally binding. If you want to renegotiate elements of the contract, you will need to discuss them and amend the contract before the exchange.
9. Double check to ensure everything is ready
Your property purchase is almost completed! You must agree on a settlement duration with the seller. You and your solicitor should organise paperwork and contract details during this period. You must also ensure the lender is ready to transfer the funds on settlement day.
This is when you want to ensure everything is done and all documents are up to date and accurate. You will need the assistance of your solicitor, accountant and mortgage broker at this time.
10. Settle your property purchase
Settling is the last stage of buying your Australian home. Settlement day is the final step in the sale transaction – typically around six weeks after the contracts are exchanged. On settlement day, you will confirm all the essential details, prepare the money for the purchase, check the registration fees, approve the settlement statement, and conduct a final inspection of the property.
Settlement day can be overwhelming. There is a long list of tasks to accomplish, and you might need help with something. Don’t worry. With the right solicitor, mortgage broker, and accountant, you will have a strong team who will quickly guide you through every step of the home-buying process.
Here are some things to bear in mind that you might have to do during the day:
- Check your solicitor’s invoice
- Confirm local council rates
- Adjust the water and sewage charge
- Follow up on the registration of title
- Insure the property
- Collect the keys to your new property
Key takeaways for any foreigner buying property in Australia
Buying property in Australia is not that much different from anywhere else. Australian residents aren’t required to go through as many hoops as foreign nationals.
The Australian government introduced restrictions for overseas investment, with higher foreign citizen stamp duty. However, despite these extra inhibitions, the government does want to encourage foreigners buying property in Australia to invest in Australian property as it supports the economy and improves the housing shortage.
The key takeaway for buying property in the land down under is to gather a strong team of professionals from the beginning. Experienced brokers and solicitors will make your buying process much simpler and more stress-free.
If you want further guidance about buying a home in Australia, Odin Mortgage is here to guide you.
Frequently asked questions
Can you buy property in Australia without being a citizen?
The answer to the question, “Can a foreigner buy property in Australia?” is a simple yes. Anyone can purchase property in Australia. The Australian Tax Office, however, insists that non-residents apply for approval to invest. Application fees are typically upwards of $5,000. The process can be challenging, but with an experienced solicitor and the right mortgage broker with an Australian credit licence.
Why does Australia allow foreigners to buy property?
Australia wants to encourage foreigners to purchase property to boost the economy and provide more housing. One of the stipulations of buying a house as an overseas investor is that you must create more homes out of the land. Similarly, the Australian Taxation Office can generate revenue through land tax, capital gains tax and stamp duty.
How much does an overseas buyer purchasing in Australia need to earn to buy a house in Australia?
There is no minimum income required to purchase a house in Australia. However, considering the average house price is $1.25 million, and non-residents must put down a deposit of 20% to 30%, you will need a hefty amount of savings. Similarly, the additional costs of the stamp duty in Australia and application fees can hike the prices significantly.
Also, lenders often only consider 50-80% of overseas investors’ income when making a home loan offer.
Is it hard to buy a home in Australia?
Purchasing a home in Australia is a challenging process. However, you will be in the best hands with a strong team of solicitors, brokers and accountants. Ensure you thoroughly research all the requirements for overseas investors, as submitting the wrong information or missing essential details can be timely and costly.
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