10 top tips for buying property in Australia from overseas
Accessing the buoyant Aussie real estate market from overseas isn’t without its challenges, but there are some top tips to avoid the major pitfalls.
Be clear how the Foreign Investment Review Board rules apply to you
Deposits (think about them upfront)
Know what you can afford before you kick off
Engage a tax professional with experience in your circumstances
Add a lawyer to the upfront team
Consider the best way to conduct your search
Rushing and missing key steps can cost you dearly
Appealing offers aren’t always just about price
Be ready for exchange well before
Prep the whole team for settlement at least a week prior
Be clear how the Foreign Investment Review Board rules apply to you
If you’re an Aussie, living overseas temporarily or even permanently, and still have your Australian citizenship, approval from the FIRB is not required.
If you’re a foreign national, living in Australia on certain visas, the FIRB review will apply in some way (however you may be eligible for certain waivers of fees if you’re a New Zealander and are eligible for or hold a special category visa).
But if you’re a foreign national, living outside Australia, most likely FIRB will apply and your first step is to secure FIRB approval to invest. The best route is to apply for an Exemption Certificate which allows you to bid on multiple properties confidently, rather than reapplying for each property. Given that the approval time can be many weeks, it’s important to have this upfront before the serious search begins.
Note also that the FIRB fees increased in December 2023 including higher fees for purchasing established properties, increase penalties for keeping a property vacant and the cutting of fees for foreign investment in built-to-rent projects. Check them out here.
Deposits (think about them upfront)
Even if you don’t need finance, it’s wise to consider the ballpark deposit needed for the property budget you have, ensuring that this is available and easily transferable. In some of Australia’s more competitive markets it’s expected that, once your offer is accepted, the deposit funds will hit the vendor’s bank account (or their real estate agent’s trust account) that same day. Otherwise the contracts will not exchange and you may find another buyer can swoop in.
For this reason, it’s important to consider whether holding those funds in offshore accounts is wise, particularly if you find yourself seriously considering a property.
We strongly recommend the funds for the deposit of your maximum budget sit in an Australian account as your decision day looms on any property. Things can move very, very fast.
Know what you can afford before you kick off
For those who do need finance, it’s worth researching well before the search commences. Lenders may have stricter criteria for expats, such as requiring a larger deposit or higher interest rates. It is important for you to research different lenders and financing options available, well before you start searching so that you’re clear about what you can truly afford and don’t waste time looking at things outside of the realm of realism.
Engage a tax professional with experience in your circumstances
You may be subject to different tax implications when buying property in Australia. For example, you may be required to pay capital gains tax on any profits made from selling the property. It is important to seek advice from a tax professional to understand your tax obligations.
Add a lawyer to the upfront team
You will definitely need a conveyancer to process the contract negotiation, exchange and settlement of the property. You may need to appoint a power of attorney to act on your behalf during the property purchase process. This is especially important if you’re unable to be physically present in Australia to sign documents or attend settlement (although much can be done online).
Consider the best way to conduct your search
Australia has a relatively simple digital landscape that covers the vast majority of real estate in key markets, across just two websites. Domain.com.au and realestate.com.au
However, there are a growing number of properties that never make it to the open market – listed off market for a variety of reasons (privacy concerns around family breakdown, lack of desire to invest in marketing etc). What’s more, it’s often difficult to rely on online pictures and selling agent’s videos to truly understand the property, without the ability to physically inspect.
So, many Australians (particularly at the premium end of the market) are enlisting the help of a buyer’s agent. They will do the searching for you, shortlisting properties and sharing videos that show both the good and the bad, so that you have better sense of the property in question. They will also shortlist the very best properties that meet your requirements, enabling you to decide which properties you want to go to the next stage on.
Rushing and missing key steps can cost you dearly
Prior to making an offer on any property, it is important to conduct thorough due diligence to ensure that there are no hidden issues or liabilities.
Again, your buyer’s agent can do much of this on your behalf.
For homes, a building and pest inspection is strongly recommended to ensure that there are no hidden issues or you’re aware of the extent of them (and likely budget needed).
It’s also wise to understand if there are any Development Applications in the immediate vicinity that may impact the property in any number of ways: ongoing construction noise, reduction or removal of view or light, parking issues to come etc.
For an apartment, a thorough review of the Strata report is recommended to identify whether there has been any historical disharmony and whether the building is run well. Failing to do so may lead to significant unexpected costs down the track.
A good buyer’s agent will also do other enquiries for you. If you’re considering future renovations, where are services such as sewer located that might disrupt your plans for a backyard pool? The list of other meaningful enquiries will depend on the specifics of the property and your future plans for it.
Appealing offers aren’t always just about price
After finding a property, completing the appropriate level of due diligence on it, the next stage is to make an offer and negotiate a price with the seller.
Most properties in Australia’s more competitive markets are sold under auction conditions. But, in the current market, it is commonplace for an offer to be accepted pre-auction. This means if you’re not speaking with the agent constantly throughout the process you may miss out on one of your shortlisted properties thinking you had time to see it run to auction.
While price is an important part of getting an offer accepted, it’s also wise to understand the motivations of the vendor and any aspects of the deal that could make your offer more attractive to them beyond price. A buyer’s agent can assist with this strategy.
You should also consider what level of access you’d like to request from the vendor. Generally they’re not obligated to offer access beyond the pre-settlement inspection outlined below. However, it’s possible to negotiate some access for things like quotes from trades and measurement of spaces.
The conveyancer (lawyer) you have appointed will have run through any amendments to the contract and been negotiating those terms with the other side. Your offer may be made unconditionally or conditional upon those contract changes.
The alternative is to bid at auction, where you have clear and open transparency as to where other potential buyers see value.
Be ready for exchange well before
You may be extremely surprised at the speed with which negotiations happen, once you have entered into a dialogue on offer with the vendor’s agent. This is why having the deposit funds ready to go is so crucial. Any bank transfer delays can jeopardise your deal. Once the contracts are signed by both parties, the deposit will be paid and as soon as this is received, the contracts are formally exchanged.
There is then a period of time prior to settlement (or handing over of the keys) which will be dependent upon what has been agreed in the contract negotiations. Standard settlement periods are usually about 42 days, but the period may be longer or shorter.
Prep the whole team for settlement at least a week prior
A few days prior to settlement, a final inspection is carried out. This can be done by your Buyer’s Agent to ensure that the condition of the property is the same as when you exchanged contracts and that items specified in the contract are actually at the property as agreed.
You should also liaise with your lender to ensure they’re ready to transfer the settlement funds (purchase price less deposit already paid).
On the scheduled settlement day a time will be set at which settlement will occur. Stamp duty is payable at this time also – this may be arranged via your conveyancer.
If you’re a foreign investor, an additional surcharge on stamp duty is applicable, varying between the states and territories – but allow about 8% of the purchase price on top of the existing stamp duty payable.