Your All-In-One 2023 Guide to Buying Property in Australia as a Foreigner
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.
However, buying property in Australia as a foreign buyer can present challenges due to the intricate and regularly modified regulations overseen by the Foreign Investment Review Board (FIRB). The FIRB monitors foreign property acquisitions and has implemented a distinct application process.
But don’t worry. 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. We’ve also put together ten steps to quickly get you closer to buying your Australian dream property as a non-resident.
How to invest in Australia as a foreigner
The Foreign Investment Review Board (FIRB) wants foreign investors to focus on new dwellings rather than established ones. 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 residents buy in Australia?
Types of property foreign residents can buy in Australia
Foreign investors can buy new buildings or vacant land to construct a property, which is much easier than buying an established property. Foreign investors will need to apply through FIRB to 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.
Types of Land in Australia foreign residents can buy in Australia
It’s essential to understand the different types of land available for purchase. Australia has several categories of land, including residential, commercial, agricultural, and industrial. Each type of land has its own unique set of rules and regulations governing its sale and purchase, so it’s essential to research and understand the relevant laws and regulations before making any decisions.
Residential land: Residential land is typically used for housing, such as building a home or apartment complex. In Australia, foreigners are generally allowed to purchase new residential property but must obtain approval from the Foreign Investment Review Board (FIRB) before proceeding.
Commercial land: Commercial land is used for business purposes, such as office buildings, shopping centres, and industrial parks. Foreigners are generally allowed to purchase commercial land but must obtain FIRB approval.
Agricultural land: Agricultural land is used for farming and agricultural purposes, such as livestock grazing or crop production. Foreigners are generally allowed to purchase agricultural land, but there may be restrictions on the use of the land and the types of activities that can take place.
Industrial land: Industrial lands, such as factories and warehouses, are used for manufacturing and production. Foreigners are generally allowed to purchase industrial land but must obtain FIRB approval.
When it comes to buying land in Australia as a foreigner, it’s about more than just understanding the legal and financial considerations. Foreign buyers must also consider the cultural and social differences when purchasing land in Australia. It’s essential to understand the local customs and traditions, as well as the legal and social obligations that come with
Exception cases: How can foreign buyers invest in established dwellings?
Established dwellings are generally not approved for purchase by foreign investors, with a few exceptions. Foreign investors can try for approval when buying established properties in the following exceptional cases:
- 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, you must 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 with huge fines of as much as a few hundred thousand dollars.
What should I consider before buying property in Australia as a foreigner?
If you’re a foreigner, expat or have a temporary visa, consider what makes a good property purchase in Australia. A good investment in Australia may differ from other countries.
The critical factor many Australian citizens consider when buying real estate is location. In such a huge country, narrowing down your dream location to one area can be challenging. However, proximity to the beach or a CBD is typically a good 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 on the globe.
Financing options for foreign buyers
In addition to the legal considerations, foreign buyers must consider financing options when purchasing property in Australia. Many foreign buyers opt to take out a mortgage to finance their purchase, but it can be challenging to secure financing from Australian banks if you are not a resident of the country. Foreign buyers may need to seek alternative financing options, such as private lenders or offshore banks.
It’s important to note that lenders may have different requirements for foreign buyers, such as higher down payments or stricter credit requirements. Working with a qualified mortgage broker or financial advisor can help foreign buyers navigate these challenges and find the right financing solution for their needs.
Ten steps to buying property in Australia as a foreigner
The actual process of getting approval and obtaining a mortgage might differ from country to country. Luckily, we’ve put together ten easy steps to make your real estate purchase more manageable.
1. Organise your team of professionals to make buying property in Australia as a foreign resident easy
No one should get a home loan for their residential property by themselves. Foreign investors, especially, need a strong 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: mortgage brokers act 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 your purchase from anywhere in the world.
- 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. Your solicitor takes care of all aspects of your property in Australia. They conduct property searches, manage ownership transfer, and supervise the contract. Your solicitor must be licensed in the state where you are buying your property. 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. Talk 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 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 thorough background checks. When applying for your formal mortgage approval, the process should be quick and easy as the vetting has already been completed.
Before applying for your home loan pre-approval, take stock of your current finances. Use our home loan calculator to determine how much you can borrow. Do your research into what your home loan options are. Expats are entitled to interest-only, fixed-rate and variable-rate loans.
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. There are several potential outcomes from your home loan pre-approval application.
Potential outcomes from your home loan pre-approval application
- Declines the application: Foreign investors regularly see their loan applications declined. 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 brokerage 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. The loan amount is also restricted; banks may lend up to 80% of the purchase price. However, overseas investors may get less.
- Special lending parameters: 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 some additional expenses beyond the purchase price. Generally speaking, reserving an extra 5% of the property value to pay for additional services is 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. Odin Mortgage can assist foreign investors to get pre-approved.
3. Confirm you qualify to buy property in Australia 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. FIRB approval is necessary for temporary residents and overseas investors.
Fees for foreigners buying property
Application fees can be quite costly. For property prices under a million Australian dollars, the application fee is $5,700. For properties above $9,000,000, you can expect to pay as much as $104,100 to FIRB.
However, as expensive as this step is, ensure you don’t skip it. Penalties for not confirming you qualify with FIRB might be fines up to $166,500 or three years in prison.
Who is exempt from seeking FIRB approval?
Non-residents or temporary residents purchasing property in Australia generally require FIRB approval. However, the following groups are exempt from this requirement:
- Australian citizens (regardless of residency status).
- New Zealand citizens.
- Australian permanent visa holders.
- Non-residents who are purchasing property as joint tenants with a spouse who belongs to one of the above groups.
- If you are a foreign national and inherit the property or are awarded it by court order or in a divorce settlement.
4. Find your property in Australia
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. Base your property search on the loan options the lender offers.
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. If you’re considering investing in a rental property, you need to consider what renters want.
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, a property manager and 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 before you purchase a property in Australia as a foreigner
The best way to get approved by 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.
How the FIRB application process works
- Visit the FIRB website and read their guidelines thoroughly to ensure you know everything you need about the approval process.
- Check out the Australian Tax Office website to start the process.
- Fill out the application form. Make sure to mention all necessary legal details and any reference numbers from previous FIRB applications.
- List the address and property details of the property you intend to purchase.
- Thoroughly check the details you provided and ensure all your information is correct. Incorrect or misinformation might cause delays and additional one-off fees.
- Read and sign the declaration form.
- Submit the form alongside the application fee. The turnaround time between submission of the application and response is typically within 30 days.
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 broadly 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 concerning 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 it is important to discuss your loan options with your mortgage broker and lender before searching for your dream home.
Utilise 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 agree on a price. Ensure your solicitor thoroughly checks the contract before signing.
7. Obtain formal mortgage approval
If your pre-approval is completed, obtaining formal approval of your loan should be a relatively simple process. It is also known as unconditional approval.
Most of the vetting has previously been completed. Your mortgage broker will contact the lender, and they will send you formal mortgage approval and loan offer documents.
8. Exchange contracts
Your solicitor conducts this step. Your legal representation will swap signed contracts with the seller’s solicitor, and you must pay your deposit. The size of your deposit would have been negotiated with your lender during the pre-approval stage.
When the contracts are exchanged, 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 if everything is ready to buy a property in Australia
Your property purchase is almost complete! You will need to agree on a settlement duration with the seller. You and your solicitor should organise all your 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 completed accurately. You will need the assistance of your solicitor, accountant and broker during this important time.
10. Settle and get your Australian property
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 your money, 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; your solicitor, mortgage broker and accountant are experienced professionals who will guide you through every step of the way.
Here are some things to bear in mind that you might have to do during the day of settlement:
- Check your solicitor’s invoice
- Confirm local council rates
- Adjust the water and sewage charge
- Follow up on the title registration
- Insure the property
- Collect the keys to your new property
Get pre-approved for Australian home loans with Odin Mortgage
Buying property is not that different in Australia from anywhere else. However, Australian residents aren’t required to go through as many hoops as foreign nationals. Foreigners face challenges when trying to obtain a home loan in Australia, as most Australian lenders have strict rules that require borrowers to be Australian citizens.
Those that lend to foreigners often impose more rigorous lending criteria, including higher interest rates, larger deposits (usually around 30-40%), restrictions on using foreign income to pay the loan, and the need to obtain FIRB approval. However, options are available from internationally recognised banks such as HSBC and Citibank that operate in Australia and offer home loans.
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 international investment 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.
To secure your home loan, Odin Mortgage is an expert in approving home loans for expats looking to buy property in Australia.
It’s also important to remember that investing in Australian property has tax implications. If you earn any rental income from your investment, you must report it on an Australian tax return. Additionally, you must pay Capital Gains Tax if you sell the property for a profit.
We can help you with your taxes, too, with Odin Tax. Our team of experts specialises in tailoring tax returns for expats and overseas residents.
Contact us today for our expert assistance.
Frequently asked questions
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.
Australia wants to encourage foreigners to purchase property in order to boost the economy and provide more housing. One of the stipulations of buying a house as an overseas investor is that you have to create more homes out of the land. Similarly, the Australian taxation office can generate revenue through land tax, capital gains tax and stamp duty.
There is no minimum income required to purchase a house in Australia. However, considering the average house price is $955,927 and non-residents are required to put down a 30% deposit, you will need a hefty amount of savings. Similarly, the additional costs of stamp duty and application fees can hike the costs up significantly.
Also bear in mind that lenders often only consider 50-80% of overseas investors income when deciding to make a home loan offer.
Purchasing a home in Australia is not the easiest process. However, with a strong team of solicitors, brokers and accountants, you will be in the best hands. Make sure you thoroughly research all the requirements for overseas investors as submitting the wrong information or missing important details can be timely and costly.
No, Australian expats in Singapore do not need to apply for the Foreign Investment Review Board (FIRB) approval. However, Singaporean investors need to do so. Typically, foreign investors can only purchase new homes or vacant land.
Many lenders will accept 100% of the net income in Singapore dollars (SGD). However, some lenders may only consider only 80% of the income.
If you’re a temporary resident on a visa, you will still need approval from the FIRB to buy property in Australia. This applies to visas such as the partnership visa, 457 work visa, temporary skills shortage visa or student visa, as you are still classified as a foreigner.
The only exception to this is if you are in a joint tenant agreement with an Australian in a spousal relationship.
New Zealand citizens on temporary visas are exempt from many of the rules other foreigners have to follow and are typically given the same rights as Australian home buyers. However, if buying property from outside the country, they may need to pay the foreign citizen stamp duty.
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