These are some common questions asked by British investors when buying property in Australia - and our Australian Property Expert's answers.
1) What makes Australian property an attractive proposition for British investors?
Australia offers familiarity to the Brits as it is based on British law and therefore not as unfamiliar to British investors, as investing in other countries may be.
Property for sale in Australia
If one is to put either their lives or their money into another Country the economy of the area is of utmost importance.
It is common knowledge that Australia has had an outstanding economy over the last decade and is a politically safe and stable environment. The Migration policies of the Australian Government are very stringent and seek to protect the Australian way of life. Many British people we speak to share with us their concerns about the influx of unskilled migrants into Britain.
Property prices are very affordable for the British investor with the favourable exchange rate and they are able to borrow for the property in Australia even as a non resident.
There is an excellent rental market in Australia as 35% of the population rent their homes. The Australian Government offers excellent tax advantages for people to buy properties to rent out and these are available to the non resident investor also.
In some areas such as the Gold Coast in Queensland the rental market is higher due to the ongoing population growth from other parts of the country.
There are very strong consumer protection laws in Australia which results in people being protected at the point of sale and on an ongoing basis. The Residential Tenancy Act in each state also protects landlords as well as tenants.
2) Are you seeing a genuine increase in British people looking to invest in Australia?
The answer to that is a resounding YES!
As more and more Brits migrate to Australia more and more of their relatives and friends visit or at least get to see the various photos which are sent and this has increased the awareness of Australia. There is a lot of media intention on Australian which is instilling confidence amongst international investors.
The sporting competition between the two countries also means that more and more Brits visit and see for themselves what a wonderful life there is in Australia.
3) If a client is planning to emigrate to Australia, is it beneficial for them to have committed to the Australian Real Estate market first, rather than simply selling up and moving 'Down Under'?
In fact one of the biggest mistakes UK residents make is selling up and coming to Australia not having invested previously if they were in a financial position to do so.
There are three significant reasons to invest prior to any move
* They will have established an Australian Credit rating. In the event they do not do that, many lenders will not lend for cars or homes to new immigrants until they have had 2 years work history in Australia. Having a mortgage prior to the move negates that rule.
People believe that if they have opened an Australian bank account that would give them and Australian credit rating and that is not the case.
The L.V.R (Loan Value Ratio) is more as a resident borrower than for a Non residential borrower. However when they relocate to Australia the loan can be transferred to a residential loan giving them more funds and being able to access their initial deposit plus any equity growth for another purchase for themselves or investment.
All of this is little known by the people we speak with there in UK. Provided they use the correct lender of course.
* They establish tax credits which will mean that they have to pay little or no tax on arrival until the tax credits are used up and the tax they pay annually is reduced.
* They get their foot on the property ladder SOONER RATHER THAN LATER
4) Is finance easy to obtain for clients looking to invest in Australia?
It is very easy for offshore investors to obtain a loan in Australia. All they need to do is provide:
a) proof of income
b) proof of deposit
c) proof of income
If the client can not prove income then they can apply for a Low document loan which is at a slightly higher interest rate. That loan can be changed to a Full document loan any time they can prove income with tax returns and pay slips for most lenders.
The loan to value ratio is less for non residential people than for residential people but again that can be altered once working in the country and making application to the lender.
5)What finance will a client need available to them in order for them to be able to consider purchasing a property in Australia?
This will depend if they are borrowing as an offshore or resident borrower.
As an offshore borrower (meaning their income is derived outside of Australia) they do not need to show any debt service ratio.
If they are deriving their income in Australia then they will be subject to the 35% debt service ratio for on shore residents. Again they will need to prove they have the deposit required before the lender will prepare mortgage documents.
In fact it is in their interest to have organised a mortgage for an investment property prior to the relocation but to do so before they have no proof of income in the UK.
6) Are Guaranteed rentals available in Australia and if so for what term?
Some developers offer rental guarantees but they are usually loaded into the price so not really worth having in the first place. The term goes generally for 1 to 2 years around 6%.
In fact Australian lenders do not like rental guarantees as they are not seen as anything of worth. In the past rental guarantees offered were very often not honoured and when the rental guarantee period is over the landlord gets less rental. It is far better to invest in a property that research has been done that there is a greater demand for property than there is a supply. This is far more protective than rental guarantees.
7) If during the course of the year a client who has invested in Australia wishes to utilise their property for a holiday, how long are they allowed to stay before returning to UK?
There are 2 parts to this question:
There are permanent and holiday rental properties which investors can buy into. They are not called “buy to let”as they are in UK. They are known as investment properties.
If the person had invested in a holiday apartment they can use the property themselves as it will be furnished and equipped. However they would have to give notice to the Property Manager to ensure that the Manager did not rent their unit out during the time they wanted to use it.
In fact this is often false economy as if they are going to come at the busy time of the year for example Christmas period that is when they would be getting the higher rents so they actually forfeit a better return to do that.
If they invest in a Permanent property rental then it is unlikely that they could use that as it would not be furnished. With permanent rental tenants will have their own beds, tables, chairs etc.
Both of these markets are very different and the intending purchaser should be aware of the differences in both upfront costs and on going costs.
As to the question how long can they stay before returning to the UK.
This is an immigration issue. They can apply for a 6 month holiday visa
It is suggested clients visit http://www.australia-migration.com/
to get the legal answer to that query.
All UK residents need to apply for a tourist visa to Australia.
8) Is the British investor like to see real gain on their investment?
Regardless if it is a British investor or an Australian investor the answer to that is simply; 'Depending when they buy and where?'
Naturally over the long term properties will always increase.
If they are looking for a shorter term then they must buy at the right part of the cycle .
There is in fact no such thing as an 'Australian Property market'. There are 6 states and 2 territories in Australia and what is happening in one region is not necessarily happening in another. This means that each area must be taken in isolation for the purpose of prediction and identifying the cycle of any area.
Property can only be in one of 4 places at any given time:
* THE UPTREND
* THE PEAK
* THE DOWNTURN
* THE CORRECTION
If a person puts in a 30% deposit whether that deposit increases short term or long term is totally dependent upon what part of the cycle the buyer bought at.
This is true for all property markets around the world.
9) Why should a British client consider Australia rather than a more popular or instantly recognisable destination such as Spain?
All investments are personal and every ones own objectives are different. It seems that the people who buy in Spain buy it with personal use in mind, i.e. to use it as a holiday home. It is doubtful this would be the case with investing in Australia due to the distance factor.
Australian properties are built to a very high standard and properties are Freehold and Clear Title with no changes being able to be made to them after purchase.
A person’s own financial circumstances are also what would determine where they could afford to buy.
If the purchaser is intending to emigrate to Australia then the answers shown in question 3 would not apply to a Spanish purchase.
10) Does investing in Australia help a clients 'cause' if they wish to move to Australia permanently eventually?
There are no points allocated to a person investing in Australia for the purpose of Migration visas. However it does show a bona fide commitment to the country.
The benefits for investing prior to relocation are answered in questions 3
The real benefit is not as much a fiscal one but one of having undergone some Australian matters before hand. Dealing with lawyers, banks, property managers etc gives people a better feel of the way of doing business in Australia.
