Australian Citizen Living Overseas Buying Property In Australia

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So you’re thinking of buying property in Australia as an Australian expat? Many Australian permanent residents living overseas buying property in Australia wonder what their home loan options are and what differences there are in investing in Australian real estate as an expat.

However, while buying a residential property from abroad presents some additional challenges, the process is largely the same. We’ll walk you through the steps for buying an Australian home as an expat and help you overcome any difficulties you might face.

Why Should I Invest in Property in Australia?

Many Australians in and outside of Australia are looking at property as a way to grow their wealth. Investing in real estate can provide attractive returns through capital growth and rental income. But why should you specifically consider property in Australia as an investment option?

The Land Down Under has a strong and stable property market compared to other countries. Factors like population growth, foreign investment, and limited land supply help drive capital growth in our major cities. Australia’s tax and regulatory environment also makes property investment appealing. Negative gearing and capital gains tax discounts provide incentives for investors.

However, many Australians with a permanent visa do not realise that they can apply for a home loan and are missing out on the advantages of Australia’s real estate markets. Whether you want a second home or earn an extra income with a rental property, Australia is a prosperous place to invest in real estate.

Easy to Invest in Australia

It is surprisingly easy to invest in Australia as an Aussie expat. While Australia has strict regulations and investment laws restricting foreign investment, as a permanent resident of Australia, you avoid most of the property laws that prevent foreign investors or those with a temporary visa.

Although, there are some additional challenges for Australian expats purchasing property in Australia. However, if you follow our expert advice, we’ll share how to make a real estate purchase from overseas without any hassle or stress.

Stability

In addition, the Australian property industry has proven stable over recent years. Compared to foreign property markets, Australia’s housing market prices are relatively stable.

For example, the Global Financial Crisis saw property prices in the US and UK fall dramatically. However, property prices in Australia actually increased in value. It is a good sign that a property purchase in Australia is a strong investment opportunity.

Consistent Growth Performance

As the population grows and the demand for housing increases, house prices are continually going up in value. Similarly, the rise in immigration to sunny Australia is pushing property prices up and increasing property development across the country.

Therefore, investing in property in Australia is a lucrative opportunity for foreign investors and permanent residents alike. It is an especially lucrative investment prospect for Australian citizens who want to rent their property out to others. The demand for housing similarly increases rental prices.

Tax Advantages

The Australian tax system provides several incentives for property investors, including negative gearing (allowing deductions for rental property losses against other income) and capital gains tax discounts on investment properties held long-term.

Can Expats Buy Property in Australia?

Yes, all Australian residents can invest in the Australian property market. Whether you want to purchase vacant land or established dwellings, buying property in Australia from overseas as an expat is entirely possible. However, there are some things to watch out for.

Unfortunately, not all banks and lenders offer mortgages to Australian citizens living overseas. It is a good idea to find a mortgage broker who specialises in home loans for residents living abroad.

Discuss your unique situation with one of our specialists and get on the fast-track to homeownership in Australia!

Australian Expats Buying Property in Australia: Getting Started

How Can I Find a Property in Australia?

If you’re living abroad, it can be challenging to find the perfect established dwelling or vacant land plot in Australia.

The first step is to research where in Australia you want to invest in real estate. Consider house prices, investment returns, demographics, and location. Close proximity to a beach, urban area and good schools and shops are always important factors.

To find your property, you can look online at real estate agent websites or employ the help of a buyer’s agent. Different from a real estate agent, a buyer’s agent is someone who uses your preferences to find properties that you might be interested in. They present your options, and you choose. This is a good option if you cannot easily visit Australia to house hunt yourself.

What Are the Property Prices in Australia?

Property prices vary quite dramatically depending on where you buy your established dwelling in Australia. Housing prices have risen substantially in recent years, especially notable in Darwin, Canberra and Hobart. This suggests that there has been a strong demand for housing, despite lockdowns and the impact of coronavirus.

Residential property investment is a strong, lucrative prospect for expats, with the housing market only expected to continue to grow.

The median house price in Sydney, New South Wales (the most expensive city to buy residential property) is currently $1.6 million AUD. The median house price for combined capital cities in Australia is $944,229 AUD.

Would I Need to Hire Any Professionals?

Although not every buyer needs to enlist the assistance of professionals – it is a good idea to surround yourself with experts to make the buying process run smoothly.

These are the professionals you should consider hiring:

  • Buyer’s Agent – to assist your property hunt.
  • Solicitor – your solicitor is crucial to helping you work your way around all the additional rules and regulations that are imposed on buying property in Australia from overseas. They are also required to read through your property contract and exchange it with the seller.
  • Mortgage Broker – a mortgage broker will help you apply for your mortgage and ensure that you are getting the best possible deal. Look for a broker experienced in helping expats and foreign nationals.
  • Accountant –  although not essential, your accountant will assist in your preparation of all your financial documents to help you get your home loan. They will also structure your finances in the best way possible to suit your lifestyle as an expat.

Getting a Mortgage and Securing an Expat Home Loan in Australia

The Application Process

Applying for a mortgage in Australia is much the same as applying for a home loan in any country. If you have an Australian visa, the process is a lot simpler than for foreign investors trying to purchase real estate in Australia.

Before applying for your home loan, it is sensible to conduct as much research into lenders, mortgage brokers and the property market in Australia. The more you know about the current housing market, the easier it will be for you to negotiate and ask lenders for more features or a lower interest rate.

To get a mortgage in Australia, you should approach the mortgage broker or lender to see how much you can borrow. Lenders will base their decision on the property value, the amount of deposit you can put forward, your credit history and your financial details.

Ensure you are buying property from an established lender with an Australian credit licence, and seek legal advice if you are unsure about the process.

As touched on earlier, investment property in Australia is increasingly popular for expats and non-residents outside of the country.

The Benefits of Expat Mortgages in Australia

Expat mortgages in Australia offer a range of benefits designed to make homeownership a reality for you, even if you’re living abroad. Here are some of its benefits:

  • Up to 30 year terms
  • Variable & fixed rates available
  • No interest rate penalties for expats
  • No early repayment fees
  • Interest Only loans available
  • Equity release for investment possible

What Lenders Consider

To get a mortgage, approach mortgage brokers or lenders to determine how much you can borrow. Lenders will base their decision on the property value, the amount of deposit you can provide, your credit history, and your financial details. 

Ensure you are working with an established lender holding an Australian credit licence, and seek legal advice if you are unsure about any part of the process.

Loan Options

When considering lenders and loan options, compare interest rates. As an expat or permanent resident, you may be eligible for interest-only loans, fixed-rate loans, and variable-rate loans. 

Discuss the different loan types with your lender to determine which is best for your situation.

How Much Should My Deposit Be?

As an expat, your deposit should be 30% of the residential property’s worth. Part of the lender’s decision on whether to offer you a home loan for your real estate investment is based on the deposit size.

Generally speaking, the larger the deposit, the more likely you are to receive a better offer from lenders. This is because you can prove your ability to save money. Whereas, a small deposit will be a higher risk for the bank.

Lenders work out how trustworthy you are by calculating your LVR (loan-to-value ratio). You can work out your LVR by dividing the loan amount by what the property is worth. As expats need 30% of the purchase price as a deposit, it is unlikely that lenders will offer home loans to anyone with a loan-to-value ratio higher than 70%.

Although, some banks do offer loans to applicants with an LVR as high as 95%. However, in this instance, the lender will require the person buying the property to pay for Lenders Mortgage Insurance. This protects the lender against the borrower defaulting on their monthly payments.

If you can afford to put down a significant deposit, it increases your options. A lender will be willing to offer you a higher loan so you are better able to purchase more expensive properties. Similarly, the lender might reward you with lower interest rates or other benefits.

What Documents Do I Need to Apply for a Loan?

It is crucial to be ready to provide all the right documents to banks, solicitors, the Australian Taxation Office (ATO), and real estate agents throughout the home loan process.

To apply for your mortgage, you often need to supply the following documents:

  • Passport
  • Paychecks
  • Tax return forms (if you’re self-employed)
  • Proof of address
  • Australian visa or proof you are an Australian citizen
  • Bank statements

The most important documents you need are proof of your foreign income. Most lenders require at least three months of bank statements to evidence your salary being deposited into your account.

Get a free Australian mortgage assessment today.

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Challenges for Expats: Are There Any Barriers to Getting a Loan Approved?

As an expat, be prepared for mortgage brokers to conduct more thorough background checks. 

Income Evaluation for Expats/Foreign Income

The lender will often consider only 80% of your net income (or even 50% in some cases with less reliable currencies) rather than the full amount when evaluating your ability to repay the loan.

Exchange Rates

Banks may be hesitant to lend to foreign buyers or Australian citizens residing overseas due to currency fluctuations. Different currencies might delay or limit your loan approval to purchase Australian property. Some currencies, such as the GBP or USD, are more reliable. 

However, the lender will still consider only 80% of your net income to account for changing exchange rates. If you earn a less stable currency, it might be harder to get your home loan approved.

Foreign Tax Rates

Similarly, foreign tax rates might impact your loan application. Banks cannot keep track of tax rates in every country around the globe. 

Often, the lender will just apply Australian tax rates to your income when considering your ability to pay back the loan. 

Foreign Spouse Income Considerations

If your spouse is a foreign person, many lenders won’t consider their income. Or, if they do, they will be subject to the stamp duty surcharge that can be very costly. 

If you need their income to afford your residential real estate, you might be able to put them down as co-borrowers as opposed to co-buyers. 

Other Income Consideration

Other types of income, like bonuses, overtime, or foreign rent, are ignored by some banks. Plus, some lenders require you to pay loan establishment fees, which could be higher for non-residents or expats.

Additional Fees and Charges for Non-Residents/Expats

While Australia does want to encourage foreign investment, Australian expats are treated as non-residents when trying to apply for a home loan. This also means that, beyond the loan application, there are certain land tax surcharge costs and foreign citizen stamp duty fees that you might have to pay.

Foreign Investment Review Board (FIRB) Approval

Many foreign investors need to seek approval from the Foreign Investment Review Board FIRB before they can purchase any property.

However, the good news is that even though you are living overseas, Australian banks do not require you to pay a higher interest rate on your mortgage, unless you cannot provide evidence of your income.

What Are the Rules for Non-residents Living Overseas Buying Property in Australia?

In addition to the difficulty of applying for a home loan, Australian expats often struggle with the Australian government’s rules for buying Australian residential property while living abroad. Usually, commercial buildings are less restricted.

If you are a non-resident or are an Australian living overseas, you might need to apply for approval from the Foreign Investment Review Board (FIRB). We’ll take you through the rules surrounding tax, stamp duty and FIRB approval to make the buying process smoother. If you’re still unsure, you might want to seek legal advice, as incorrect applications or taxes can result in large fines.

There are often extra rules for non-residents that do not apply to expats.

Capital Gains Tax (CGT) Considerations

Understanding the CGT rules in Australia for buying and selling property can be complex, especially for expats, permanent residents, and foreign nationals. 

Here’s a breakdown of the key points, but it’s important to remember this is not exhaustive information and seeking professional advice is recommended for your specific situation.

  • Australian Residents: Subject to full CGT on capital gains from selling all Australian property, regardless of acquisition date. Enjoy the 50% CGT discount for assets acquired after 8 May 2012 and potentially the main residence exemption for their primary home.
  • Australian Expats: Classified as residents for tax purposes for up to 4 years after leaving Australia if they meet specific criteria. CGT rules remain the same as for Australian residents during this period.
  • Permanent Residents: Treated as residents for tax purposes unless they formally declare otherwise. Subject to full CGT on all Australian property sales.
  • Foreign Nationals: Only subject to CGT on taxable Australian property, which includes real estate and business assets in Australia. They generally don’t qualify for the 50% CGT discount after 8 May 2012 and are not eligible for the main residence exemption unless they meet the “life events test”.

For many years, Australian expats were exempt from paying capital gains on their main residence in Australia as long as the property was not a financial investment for more than six years. However, this is no longer valid.

You will have to pay CGT when you sell your property or if you rent it out for profit. Make sure you speak with your solicitor and property managers about whether you need to pay tax.

How Does the Stamp Duty Surcharge Work?

Another surcharge that hits temporary residents and expats is the stamp duty fee. State government taxes include paying stamp duty for real estate. Stamp duty is a land tax. Most foreign nationals or people with a temporary visa have to pay a surcharge on their stamp duty.

This particularly impacts expats with a foreign spouse. If your partner is named as a co-buyer, you will be required to pay the stamp duty surcharge. The cost of this tax varies from state to state – the surcharge is around 0.75% in the Australian Capital Territory and as much as 7% of the property price in South Australia.

To avoid paying the stamp duty surcharge, don’t name your foreign spouse as a co-buyer. Work out your stamp duty to pay ahead of purchasing a property in Australia.

At What Stage Do I Need FIRB Approval and Will I Be Disadvantaged?

The Foreign Investment Review Board (FIRB) is a department within the Australian government that sets out guidelines for investors living overseas who buy property in Australia. Australian and New Zealand citizens are usually exempt from paying for approval.

However, if you are buying a property with your foreign spouse, you might need to apply for FIRB approval. FIRB approval is usually granted if you intend to use your property to create more housing for others.

You will need FIRB approval to:

  • Buy a new build to live in
  • Buy vacant land to build housing
  • Buy a property to rent to others
  • Buy an established dwelling to knock down and redevelop for housing to accommodate more people

For example, temporary residents will likely get FIRB approval if they purchase a one-bedroom apartment to convert for joint tenants.

To apply for FIRB approval, read their application guidelines thoroughly and employ the assistance of your solicitor. Applications for FIRB approval usually come with a hefty fee.

Can I Rent Out a House I Just Bought?

Yes, renting out a residential property you’ve purchased in Australia can be an excellent investment strategy, especially for expats and foreign buyers. It allows you to generate rental income to offset mortgage and ownership costs while benefiting from Australia’s strong rental market demand, particularly in major cities facing housing shortages.

Renting Out for Expats and Foreign Buyers

While temporary residents cannot rent out established dwellings, expats with permanent residency in Australia can rent out their residential properties. This provides an avenue to generate cash flow and potentially realise capital gains from property appreciation upon eventual sale.

In fact, the Australian government encourages expats and foreign buyers to invest in rental properties as housing demand rises. Regulations have been introduced to steer foreign investment towards increasing the housing supply for Australians.

Non-residents can buy property to knock down and replace established dwellings with new, higher-density housing. Investment in vacant land for constructing new housing is also encouraged.

Considerations for Non-Resident Landlords

As a non-resident landlord, maintaining your rental property yourself can be challenging. Most property managers charge between 5-12% of the weekly rent, depending on the state.

There are also potential tax implications from the rental income that you must consider. Legal and accounting professionals can advise on tax-deductible expenses and ensure compliance with regulations around rental properties in Australia as a non-resident owner.

With proper planning, renting out your Australian property can turn it into an attractive income-producing investment for expats and foreign buyers.

Secure Your Dream Home: Australian Citizen Living Overseas Buying Property in Australia

Applying for a home loan and buying a house in Australia as an expat might seem intimidating. However, despite the extra rules and regulations imposed on people living overseas, expats are actually eligible for most of the same rights as citizens living in the country.

Make sure you do your research and enlist the assistance of Odin Mortgage to help you get your perfect property. 

Book a meeting to discuss your unique situation with one of our specialists and get on the fast track to homeownership in Australia!

Frequently Asked Questions

Yes – anyone can buy property in Australia. Foreign nationals are usually required to apply for FIRB approval ahead of purchasing the property. This can come with a hefty application fee.

Also, foreigners usually have to pay an additional stamp duty surcharge, and lenders might not consider their entire net income.

Expats generally need 30% of the house value as a deposit. Similarly, if you are earning income in a foreign currency, lenders typically only look at less than 80% of the net income. Therefore, while there is no set figure of money needed to buy property, you need to prove you have the ability to repay the loan.

New Zealand citizens, unlike other foreign nationals or those with temporary visas, are exempt from paying the FIRB application fee. However, if you are not living and working in Australia, you may need to pay the stamp duty surcharge like other foreign nationals.

The home loan process for purchasing a house or property in Australia is much like it is around the rest of the world. Begin by applying for loan pre-approval with a specialist lender or bank. Apply for FIRB approval if required. Then, approach property sellers and make an offer. Your solicitor will review the contract and exchange before settling.

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