A Complete Guide to Buying Property in Australia for Investment

5-MINUTE READ
Share:

Australia is rated as one of the most livable countries globally and is known for its high standard of living. In 2021, Adelaide, Perth, Melbourne and Brisbane all featured in the top ten most livable cities in the world list.

Property investment is one of the best ways to build wealth. However, it is a long-term commitment, so it’s important that you’ve done your research before dipping your feet in the Australian real estate investment waters.

If you are a permanent resident or expat thinking of investing in Australian real estate, read this complete Australian investment property guide to learn the ins and outs!

Reasons To Invest In Australian Property

Here are some reasons why you should invest in the Australian real estate market:

Population Growth

When it comes to real estate investment in Australia, one of the main factors you need to look into is the population of the place. In Australia, the population is on the rise in major cities like Sydney, Melbourne and Brisbane.

The vacancy rate in Australia is meagre now, with less than 2% vacancy rate. With low-interest rates and rapid population growth over recent years, the demand for housing is way more than the supply. As long as the property rental price is reasonable, it will be more popular, ensuring both rental and capital growth for investors.

Steady growth in property market

Investors are drawn to invest in Australian real estate because of rental growth. For years, Australia has enjoyed steady rental growth while achieving capital growth.

Sydney’s current average rental output rate is 5% (annual rental income as a percentage of house prices) (data source RP-DATA Rismark). The rental income can be roughly the same as the cost of holding the property, and some even have pure cash flow income.

According to statistics provided by Australia in the past 120 years, Australia’s real estate investment market is of lower risk compared to the markets of other countries. Property prices have been appreciating at an average annual compound growth rate of 6.8%.

Consistency

Australia’s real estate market is one of the most consistent investment property markets in the world. It has an average ROI of 7% per annum. Not just that, it also has fewer years of decline in comparison to other property markets worldwide. For over 100 years, Australian investment properties have enjoyed a consistent rise in the capital.

Easy to invest

Another good reason is that it is easy to buy and invest in properties in Australia. Unlike other countries, Australia does not have strict foreign investment laws, making it easier for investors to invest in the Australian real estate market.

Here are some things you should be aware of:

  • Australia has effective and strong consumer protection legislation through the National Consumer Credit Protection Act 2009 (NCCP Act)
  • The legal system in Australia is similar to the UK system
  • It is expected that the immigration trend in Australia will rise in the coming 50 years. 
  • Tax on investment properties in Australia: Although the seller must pay VAT after the property is sold, Australia’s tax law has a very generous deduction policy. Most of the expenses incurred during the purchase period can be offset by the income tax.
  • Loan policy: Many Australian banks provide financial products that help overseas investment and lending, including loans that only pay off loans with interest.

Australia has witnessed economic growth in the last 8 to 10 years. Many of the foreign property markets such as the United States market and the Hong Kong market have suffered major losses in the past, with some volatile economies witnessing a price drop of up to 70% in the housing industry. The Australian real estate investment market, on the flip side, remained undefeated.

The Australian investment property market provides investors the confidence they need and could be the best option for your long term wealth-building commitments. For long-term investment commitment, the Australian property market could be the best option for you. The low volatility of real estate in Australia makes it a desirable choice over other property markets and even stock markets around the world. No matter which country you are from, you are welcome to invest freely in the Australian property market.

Investment Property Tips For Beginners in Australia

Evaluate your finances and budget

Ask your bank to receive a statement of your credit card, and make sure you clear your outstanding debts. If your credit is not in a good place, now may not be the best time for you to buy a house or non-resident investment property. Lowering your credit card limit will help you obtain a larger financing limit.

Think About the Total Cost

  • Deposit: You typically need to take out a 10-20% deposit to guarantee the mortgage. To avoid paying the lender’s mortgage insurance (LMI), a 20% deposit is required. Low deposit mortgages exist, but your mortgage insurance will be much higher.
  • Stamp Duty: The amount of stamp duty you pay depends on the state your property is in and the property’s purchase price. You can use the stamp duty calculator to get a specific quote.
  • Legal and Transfer Fees: Depending on the amount of legal work required for property transfer and other standard inspections, you should set aside AUD$2,000-A$5,000.
  • Financial and Insurance Expenses: If your loan exceeds 80% of the purchase price, you will need to pay for Lenders Mortgage Insurance.

A mortgage loan application may cost anywhere between A$200 and A$600, depending on the lender. If you get a loan as part of a package, this will often be waived.

A Complete Guide To Purchasing Investment Property in Australia

Be Mindful When Choosing the Location and Property Type

Consider making a list of all non-negotiable, “must-have” requirements. The following is a sample list of those who want to become a homeowner.

  1. Location – close to work, school, family, and friends
  2. Public transportation, services, and shops
  3. Does the area have a mature infrastructure or development plan?
  4. Suburban features – is there a good atmosphere and friendly community?

When buying an investment property in Australia, the factors to consider are a little different from buying a house. Determine whether you want to fix it up, turn it over, hold the property or rent it out.

When choosing the type of property to invest in, a different set of criteria is required. Look for the following categories of properties while investing:

  • Look at housing prices in areas with higher rental yields
  • Research recent sales prices to understand prices
  • Is the rental demand strong? See if the vacancy rate is tight
  • Are there upcoming developments or zoning changes? What impact will they have?
  • Is it close to schools, shops, hospitals, or public transportation?
  • What will the maintenance cost be?
  • How many bedrooms, bathrooms and parking spaces are there?
  • Property inspection is important!

Ask a qualified inspector to conduct an assessment of the property. They will look for structural defects, pests, faulty wires, plumbing and drainage problems, asbestos, lead paint, etc.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Additional Incentives

Compared with some countries’ cumbersome investment policies, the entire approval process for investing in and buying Australian property is relatively simple.

Most real estate and land in Australia are generally sold and transferred in the form of ownership (ie: buyers have indefinite ownership of the land or house). Owners have the right to live, rent, sell, transfer the ownership or leave it vacant.

First Homeownership Grant

Are you eligible for the first home owners grant? If you and your partner have never bought a property in Australia before, you will likely qualify for a “First Home Buyer Grant” (FHOG).

FHOG is a nationwide program, but each state has its funding and the amount varies from state to state.

The government will determine whether you can get the subsidy based on whether you have previously purchased a house or investment property and whether your spouse or partner has also purchased a home or investment property in Australia.

Best Place to Buy Investment Property in Australia

Australia has long been a popular destination for real estate investors, with its strong economy and thriving property markets offering attractive opportunities for buying investment properties. Major cities like Sydney and Melbourne consistently top the lists of best places to purchase investment real estate in Australia due to their resilient housing markets and impressive rental yields. 

However, savvy investors know that looking beyond these obvious hotspots can unearth hidden gems ripe for investment. Here are some tips for finding the best places to buy investment property in Australia:

  • Look at major cities like Sydney, Melbourne, Brisbane, and Perth. These tend to have strong population growth and housing demand. Inner city suburbs near amenities are ideal.
  • Research rental yields in different areas. Look for suburbs and towns with yields of 4-6% or higher. This indicates strong demand from renters.
  • Consider regional hubs and coastal lifestyle markets like Gold Coast, Sunshine Coast, Geelong, Newcastle, Wollongong and Canberra. These can provide good yields without the huge prices of big cities.
  • Factor in future infrastructure and development plans for an area. Areas set for major transport upgrades or new amenities can see prices rise.
  • Don’t overlook affordable areas with decent rental demand. Outer suburbs of major cities or smaller regional towns can work well for cheaper investments.
  • Seek out “up and coming” suburbs that are gentrifying. These are popular with young professionals and can see strong growth.
  • Use a buyer’s agent to help identify suitable areas and properties that match your goals and budget. They have specialised market knowledge.
  • Research areas thoroughly before investing. Look at market reports, rental demand, future growth predictions, affordability and local economic factors.

The best places can vary over time. Do your homework to find the current best locations for investment properties in Australia. Also factor in your own investment goals and budget when deciding.

How Much Deposit Do I Need for a Home Loan?

When taking out a home loan, the deposit is one of the most important factors. The deposit refers to the upfront amount you pay towards the property purchase, with the remainder covered by your home loan. The deposit impacts your interest rate, monthly repayments, and eligibility for different types of loans.

What is the Minimum Deposit for a Home Loan?

Most lenders in Australia require a minimum deposit of 20% of the property’s value for a home loan. So for a $500,000 home, you would need at least $100,000 as a deposit.

Low Deposit Home Loan Options

While 20% is the general minimum, there are some low-deposit home loan options for buyers who can’t save a full 20% deposit:

  • Some lenders offer loans with just 10-15% deposit.
  • First home buyers may qualify for the First Home Loan Deposit Scheme which requires just 5% down.
  • However, low-deposit loans often have mortgage insurance which increases costs.

Benefits of a Higher Deposit

The higher your deposit, the better when it comes to home loans:

  • A larger deposit reduces your loan amount and monthly repayments.
  • A 20% deposit is ideal to get the best interest rates and avoid mortgage insurance.

While it’s not always feasible, especially for first home buyers, you should try to save as much as possible for your deposit.

Getting Help with the Deposit

If you’re struggling to save the full deposit amount, consider these options:

  • Lenders that allow family pledges or guarantees.
  • Government grants and schemes like the First Home Owner Grant.

The key is to research different lenders and loan options to find one suited to your financial situation. Home loan deposits can range from 5-20% depending on the lender and your eligibility for assistance schemes.

Thinking About Investing in Australia?

If you’re considering investing in property in Australia, getting financing from a reputable lender is key. Odin Mortgage can help make your real estate investment dreams Down Under a reality. 

Odin Mortgage specialises in loans for non-resident borrowers and expats buying property in Australia. 

Whether you’re looking to finance your first investment property in Sydney, need funding for a holiday home on the Gold Coast, or want to add to your existing portfolio, Odin Mortgage has the expertise to guide you through the process.

Our knowledgeable team takes care of everything from researching the latest rates and products to managing the paperwork and conveyancing. Odin makes financing stress-free and helps non-resident buyers access the best available loans.

Don’t let financing challenges stand in the way of your Australian property goals. Contact Odin Mortgage today to discuss how they can help fund your next real estate investment in Australia.

Frequently Asked Questions

Some key things you should know about the Australian real estate investment market: Social stability, sound policies, the proper legal system, mature market, stable appreciation, active rental market, low vacancy rate and a chronic shortage of housing supply.

Yes. As mentioned in this Australian investment property guide, the Australian government encourages foreigners to invest in their real estate and buy non-resident investment property in Australia from overseas countries like Singapore. Overseas investors can mortgage the properties they want to buy with Australian banks.

Yes. According to local laws in Australia, any income earned in Australia must be taxed. This includes a tax on investment properties in Australia. However, this income is the net income after renting. 

Therefore, it is recommended that investors take a loan from an Australian bank when buying Australian real estate to deduct the rental income to the greatest extent. At the same time, Australian accountants will use the various expenses of the property. With tax deductions, investors can maximise investment income.

Odin Mortgage Logo

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.
Featured In
Geo Expat Logo
Asia xpat Logo
Expat.com Logo
Expat Living Logo
AAHK Logo
Easy Expat Logo
FREE GUIDE

10 Best Tips for Australian Expats to Maximise Borrowing Power & Approval Success