Challenges of Foreign Real Estate Investment

The Challenges of Foreign Real Estate Investment in Australia

For years now, foreign real estate investment in Australia has been on the rise. The country’s lifestyle and its beautiful properties entice a lot of tourists to purchase their own property. Some want a house as a vacation home; some consider it an investment, and others opt to stay in the country for good. However, there has been several laws and regulation changes both inside and outside of Australia that make buying a property here more challenging.

Challenge #1: Australian Banks Being More Restrictive in Offering Home Loans to Foreigners

One of the biggest changes is with financing. Because of the rise of foreign investments in Australian soil, locals found it harder to purchase real estate property for themselves. As a result, the government was called out to prepare stricter measures for foreign investors and easier policies for local ones.

The Australian Securities and Investments Commission henceforth rolled out new policies that heavily affected foreign financing. The major changes are as follows:

  1. Australian banks are now allowed only a maximum of 10% of their total home loans to be allocated to foreigners. This means more foreigners will be competing for the smaller allotment.
  2. From a maximum of 90% Loan To Value Ratio (LTV), banks now offer a maximum of 70% LTV.
  3. Some large banks opted out of lending to foreign investors. Foreign investments have been deemed high-risk due to issues regarding verifying income accurately.

challenges of foreign real estate investment in Australia


Furthermore, many large banks previously provided loans to Chinese investors but have stopped doing so because of an increase in money-laundering schemes and fraudulent activities. The following banks that ceased expat loans are as follows:

  1. Commonwealth Bank (CBA)
  2. Westpac
  3. George
  4. ANZ
  5. Suncorp
  6. Bankwest
  7. ING
  8. ME Bank

Although there are still some banks that offer loans to foreigners, their policies have become stricter.


Challenge #2: Increase in Fees and Interest Rates

Since foreign investments are considered high-risk, it would make sense for interest rates to be higher for expats than local investors. The following rates are currently being offered by banks:

  • Foreign investors can borrow a maximum of 70% of the property value, paying at an interest rate between 6.50% and 8.00%
  • Foreign investors with a high net worth can get reduced interest rates at 5%

Also, when applying for new property purchase, foreign investors are required to submit an application at the Foreign Investment Review Board (FIRB). This application includes a non-refundable fee which is broken down as follows:

  • Property price of $1,000,000 and below requires a fee of $5,000
  • Property price of more than $1,000,000 requires a fee of $10,000, plus $10,000 for every additional million dollars of property value.

With less banks offering loans, there is an increase in non-bank lenders in Australia. However, aside from strict policies, their interest rates are significantly higher.


Challenge #3: Stricter Currency Regulations of Foreign Countries

This change has been evident specifically in China. China currently disapproves of foreign investments and expenditures. An overseas transfer of $10,000 or more are being reported now. The intended use of the transferred funds must be stated. There is also a maximum of $50,000 money transfer limit per person annually.

Although there are indeed many challenges for foreigners seeking to buy real estate in Australia, it is not impossible. The following are the possible solutions to these previously mentioned issues.


Solution to Foreign Real Estate Investment in Australia: Seek the Help of a Mortgage Broker

challenges of foreign real estate investment in AustraliaChinese investors with legitimate businesses or source of income can still purchase real estate properties in Australia. The best way is to seek the assistance of a mortgage broker who will search for banks and specialist lending institutions that have a high chance of approving the loan.

Many mortgage brokers in Australia can also speak Cantonese and Mandarin, making easy for Chinese investors to communicate their needs and wants. The following are the common requirements to be approved for a loan:

  1. Be of sound character. This includes your history of paying back any loans you may have.
  2. Authentic income source. This means your proof of income needs to be verified as legitimate. Here are some examples of proof of income that needs to be provided:
    1. For employed investors:
      1. Several months’ worth of bank statements that indicate regular salary deposits;
      2. At least 2 months’ payslips;
  • A letter of employment that indicates the nature of work and the annual expected salary.
  1. For self-employed or business owners:
    1. Two years’ worth of business tax returns;
    2. Six months’ worth of business bank statement;
  • Accountant’s letter.


If you are confident that you can complete these requirements without issue, then purchasing a property in Australia will not be a problem for you. If you need assistance in investing in real estate properties in Australia, click here.