Tips to Invest in Property for Foreigners In Australia

Real Estate
5. Oct 2023
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Tips to Invest in Property for Foreigners In Australia

The most attractive prospect for many people in investment is property. If you have an investment mindset, you are probably looking for attractive options, and Australian real estate is the best one, especially for foreigners. 

Although it is more than doable, investing abroad presents some additional hurdles. In this article, we will discuss everything you need to know about real estate investment in Australia, along with tips to invest in property.

Can Foreigners Buy Property in Australia?

Yes, foreign residents, individuals with temporary residency status, and short-term visa holders are permitted to purchase investment properties and residential real estate within Australia if the Foreign Investment Review Board (FIRB) grants them approval.

The FIRB evaluates foreign investment proposals on an individual basis. Aside from applying for authorization, there are tight guidelines for residential real estate and investment property types that can be purchased.

This is because the Foreign Investment Review Board ensures that most foreign property investment is directed toward new homes rather than existing ones.  

How to Invest in Property in Australia?

To invest in property in Australia, you must typically be a permanent resident or citizen, and many of the available house loans will also need you to meet the same criteria. Foreigners, though, can still purchase. However, the property must be a new dwelling, vacant land, or off-the-plan property, and you must have government consent.

Fees on Property for Foreigners in Australia

Foreigners are permitted to purchase property in Australia but must meet certain conditions and gain government approval. The property must be brand new, vacant land or off-the-plan. Foreigners must apply to the Foreign Investment Review Board (FIRB), which evaluates non-Australian citizens who seek to buy or invest in Australian real estate. Foreigners can buy a property if approved, but they cannot buy an established house unless they intend to live in it and then sell it after they no longer live there.

Foreigners purchasing property in Australia must pay a variety of taxes and levies. The FIRB assesses an application fee that varies according to the value of the property being bought. There is also the Foreign Citizen Stamp Duty, an additional stamp duty assessment of up to 8% plus a 2% land tax deduction, depending on the state you acquire property. Legal fees and disbursements are also charged.

Following is a breakdown of the fees for foreigners purchasing property in Australia:

  • The FIRB application fee varies based on the value of the property being bought, but it begins at AUD 6,350.
  • Foreign Citizen Stamp Duty is up to 8%, plus a 2% land tax surcharge, depending on the state in which you buy property.
  • Legal fees and disbursements.

Tips for Investing in Property in Australia for Foreigners

If you are on the way to investing in Australian property, here are the tips to get it right.

1. Get FIRB Approval: 

Foreign investors require Foreign Investment Review Board (FIRB) approval in order to purchase any property in Australia.

2. Know the Limitations: 

There are limitations on what properties foreigners and non-residents can buy in Australia. Typically, foreigners can only buy new dwellings, vacant land, or off-the-plan properties under construction.

3. Understand the Financing Options: 

Many Australian banks and financial institutions offer loans to non-residents, though the terms and conditions might differ from those offered to residents. A larger deposit is typically required, and interest rates may be slightly higher.

4. Be Aware of the Fees: 

The FIRB charges fees for processing applications, and additional fees may be associated with purchasing property in Australia.

5. Consult with Professionals: 

It's advisable to consult with a mortgage broker or financial institution in Australia to explore the best financing options. You may also want to seek advice from a tax specialist to understand the tax implications of owning property in Australia while living abroad.

6. Research the Market: 

Do your research on the Australian property market and choose the right property at the right price.

7. Consider Cash Flow: 

Do your sums and make sure you have a positive cash flow.

8. Know the Rules: 

Be aware of the rules for non-residents buying property in Australia, which are complex and subject to regular changes.

9. Choose the Right Professionals: 

Ensure you have the right professionals on your team, such as a real estate agent, solicitor, and accountant.

10. Prepare for Settlement: 

Ensure you prepare for settlement and have all the necessary documentation.

How to Get FIRB Approval? Things You Must Know

Non-residents must obtain FIRB clearance before investing in any Australian residential property. According to the FIRB rules, an interest may encompass various actions, including but not limited to signing an unconditional contract promising to purchase a dwelling or part of a residence. Understand the other interest in it, too.

  • A security interest in real property under a mortgage, even if the owner is an Australian citizen or permanent resident.
  • An option that gives you the right to buy a property at a certain price in the future.
  • A leasehold agreement with a term of more than five years when the interest in the agreement is purchased.
  • Increasing the foreign person's ownership stake in a home in which they already have a stake.

Best Areas to Invest in Property in Australia

Looking to buy an investment property? Here are the top 4 areas to watch out:

1. Hope Island, QLD:

Hope Island is an excellent location for new home investment, with a potential yield of 7.61%, vacancy rates of 2.1%, and a mean rent of $1,200.

2. Echuca, VIC:

With a potential yield of 7.20%, a low vacancy rate of 1.8%, and a typical rent of $760, Echuca is another excellent location for new home investment.

3. Munno Para, South Australia:

With increased sales and minimal vacancies, Munno Para is one of Australia's top ten neighborhoods with the strongest growth prospects for 2023.

4. South Toowoomba, Queensland:

With vacancies at 0.3% and rents rising rapidly, South Toowoomba is yet another excellent location for property investment in Australia.

Bottom Line 

Once you understand Australia's investment real estate market, you will plan an accurate investment strategy according to your financial goals. So, consider the tips and look for consultants who can guide you in more detail, particularly according to your investment purpose. For the investors, areas, or consultants, you can always refer to the directory of UmmaUp. So, get it on and invest wisely.

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