Buying property in Australia is not as easy as it used to be, whether it be residential, commercial or agricultural. But even with the strict regulations being imposed at the moment, Chinese investors are not slowing down. If you are interested in investing your money in Australian real estate, this guide can help you.
Guide to Buying Property in Australia
This guide has 11 parts. You can jump to specific parts of the guide using the links below:
- Know Your Budget
- Get Pre-Approved for a Loan
- Find the Property You Want
- Negotiate the Property's Price
- Go through the Terms of the Contract
- Get FIRB Approval
- Secure a Mortgage
- Sign the Purchase Contract
- The Settlement Process
- Start Earning from Your Property
- Pay Taxes and Duties
Just like when acquiring properties in your home country, you need to know how much your budget is. The prices of properties in various cities differ against each other tremendously, so if you have an idea on where you want to invest, you can better plan your budget. The type of house that you can purchase and amenities that it includes would also depend on your budget.
2. Get Pre-Approved for a Loan
Although this is not a requirement, getting loan pre-approval can reduce the risk of you not being able to find financing at all. A loan pre-approval means you are submitting your financial documents to the lender to see how much your borrowing power would be. It is also a great step to find lenders that have a potential to grant you a loan once you decide to buy a property.
As we know, several major Australian banks have withdrawn from giving mortgage loans to Chinese citizens. This means your choices of lenders are already slim. If you don’t get pre-approval, by the time you find the property you want, you might end up scrambling to find a lender.
Getting pre-approval also prevents you from wasting time, energy and money in finding a property, only to find out that you can’t get a loan. Another advantage is that a seller or realtor will be more likely to sell to you than to someone with a bigger offer but is still processing a loan application. This is especially true for sellers who want to sell their property fast.
You can also opt to pay in cash, but seeing as it is now difficult to get money out of China, this option can be more complicated.
3. Find the Property You Want
Once you have narrowed down the location where you want to purchase a property, the next step is to actually find one. There are several ways of finding the right property, and these are:
- Through sales posts in real estate websites;
- Through local listings in newspapers and even with the local information center;
- Through ‘for sale’ signs outside properties;
- With the help of a real estate agent.
The best way to find the right property for you is by connecting with a real estate agent. This is true especially if you hardly have the time to visit Australia to look for a property to invest in. They can communicate with you online to discuss publicized and even off-the-market properties.
However, real estate agents typically work in the interest of the seller, not the buyer. So in this regard, we recommend you hire a buyer’s agent. A buyer’s agent will discuss with you what your needs and expectations are, what your budget level is, and other special features you might be looking for in a home. There are specialized buyer’s agents who can speak in Chinese, which can make it easier for you to communicate what you want.
A good buyer’s agent will take your interests to heart and will search for the property that best matches your needs. Sometimes they already have a list of properties they know are on sale; sometimes they would connect with a real estate agent to find one. They can inspect the property and negotiate a deal for you. Although there are fees involved with hiring a buyer’s agent, you will be able to save more rather than you personally visiting Australia to find, inspect and negotiate a property. This takes us to the next step.
4. Negotiate the Property’s Price
You have finally chosen a house or a vacant land. Now you want to make sure you are getting the best deal. If you don’t have a buyer’s agent, you can negotiate the price on your own. In Australia, properties can usually be sold for a minimum of 90% of their sale price. However, this still depends on what kind of property you are buying and where it is located.
For example, if you buy in a well-known suburb, chances are the purchase price will actually be more than the listed price. This is because of the high demand in such areas. In the same light, properties in low-demand areas can sell for a low price (like the 90% sale price mentioned above). The negotiating skills of your buyer’s agent will be put to good use here.
5. Go through the Terms of the Contract
Once you and the seller or real estate agent agree on the purchase price, you will be asked to exchange contracts with them. This is the part where you need to hire a conveyancer who will look over the contract for you. A conveyancer will check the legal aspects of the contract and will explain to you what it entails in simpler terms.
You can ask your conveyancer to include additional provisions in the contract as necessary. One of the basic items you need to have added to the contract is the condition that the sale will only push through once you receive approval from the FIRB, however unlikely a rejection may seem. If this portion is not included in the contract and you immediately sign it, you may end up violating the law.
The conveyancer can also check the property for you and make sure everything stated in the contract about the property is correct. Different regions in Australia also have special regulations in their area, so it would be best to hire a local conveyancer where the property is located.
6. Get FIRB approval
Foreign investors are required to get FIRB approval before buying real estate property in Australia. Getting FIRB approval is simple enough; all you need to do is file an application, provide the documents required and pay the necessary fees. The fee involved in getting FIRB approval depends on the price of the property. Read here for more information on how to get FIRB approval and what fees need to be settled.
FIRB takes a maximum of 30 days to get your application approved, so make sure your contract includes the time allocation for seeking FIRB approval (in case you have already signed it). You can also seek the assistance of your conveyancer when filing for FIRB approval. Remember that the processing of your application will only start the day you complete the form and pay the fee, so don’t delay.
7. Secure a mortgage
While you are waiting for your FIRB approval, it’s time to secure a mortgage. Although you have gone through pre-approval, it does not mean that once you find a property, your loan will be automatically approved. But since you went through pre-approval, it would be easier for you to determine which lenders are likely to provide you with a mortgage. In order to get the best terms and interest rates, you should hire a mortgage broker.
You should be careful about signing a contract during the cooling off period. What if your mortgage does not get approved? It’s important to not commit too early and to wait for your mortgage to be approved before signing a contract.
If your mortgage does not get approved, the worst thing that could happen is that your holding deposit or reservation deposit will not be refunded to you.
Once your loan has been approved, you will receive a loan contract. Your mortgage doesn’t start until your sign it. Make sure that your conveyancer is with you before you sign the loan contract so that the legal terminologies are discussed with you. If all is well, you can sign the contract and submit to your lender.
8. Sign the Purchase Contract
Once you receive confirmation of your mortgage loan approval, then you can go ahead and sign the contract, again with the assistance of your conveyancer. This is also the point where you pay for the deposit, which is typically 10% of the purchase price. This is just the usual price and can vary based on the location of your property, and what you and the seller agree on.
The time has come for you to bring money in from China. If the price of the property is equivalent to less than $500,000 USD, then you would be required to deposit around $50,000 USD. Chinese nationals are only allowed to transfer up to $50,000 USD offshore. This is also subject to the condition that this transferred money will not be used to purchase real estate outside of China. In such cases, some Chinese nationals would send a little less than $50,000 USD so they won’t have to sign the promissory note, and use various other means to move money from China to Australia. If you have to pay more than $50,000 USD for deposit, you would need to be creative in finding ways to pay for your deposit.
9. The Settlement Process
Settlement is when the title of the property changes possession (from the seller to the buyer or the bank). There would be no need for you, the buyer, to actually be present for this since you have already signed the loan contract and the purchase contract.
The title of the property will be kept by your lender since you have used it as collateral for your loan. The keys to your assets will then be handed over to you or your representative. The property is yours!
10. Start earning from your property
If you do not intend to live in the property you purchased and instead want to earn from it, you can opt to lease. However, renting out your property is a whole different beast, especially since tenancy rules vary from one region to another. You should seek the help of a professional property manager who is an expert in the locale of your asset.
If you want to do it yourself, what you need to do is first understand the general leasing rules of the country, then the leasing regulations in your region. Once you have familiarized yourself with these, the next step is to know the rental value of your property and the competitive going rate. You can then start posting and advertising your rental vacancy. Once you receive inquiries, you will have to discuss your tenancy terms. You must also understand the rights of the tenants and the requirements to maintaining your property.
As you can see, managing your property is in a whole different level. You will not be able to successfully lease your property while you are abroad. This is why having a local representative who will take care of your property and your interests, is necessary.
11. Pay Your Taxes and Duties
Purchasing a property anywhere requires that you pay property tax. If you are leasing your property, it means you are generating income from it. This means you are also required to pay income tax. You will pay for such for as long as you own the property and you are earning from it. For more information on the taxes that you need to pay and when you should pay them, please refer to our Taxes section. Having an accountant can come in handy in these situations.
As long as you are guided properly throughout your investment process, buying property in Australia even if you’re a foreign national is no problem at all. The important thing is that you find a good team of professionals who can work with you all throughout. Of course, if they speak Chinese, that would be a huge plus. If you need help in finding the right buyer’s agent, mortgage broker, conveyancer and accountant, we are here to help. Send us a message through email or via our contact form and we will quickly get in touch.