Buying Property in Australia
For many, buying property is synonymous with ticking boxes and filling out forms. Such a large purchase certainly warrants its fair share of red tape, and expats looking to become a home owner in a country other than their own will have to be ready to take on a whole new set of rules and regulations.
Expats should note that the process will vary from state to state, but there are some general steps that apply on a national level.
Step 1: Calculate a budget and arrange mortgage pre-approval
It's certainly a nice chunk of change to add to one's nest egg, but chances are that an expat probably still won't be able to afford to buy property in Australia up front – don't worry though, most people purchasing a house need to take a loan.
Getting a mortgage in Australia
The ease with which an expat can get a mortgage depends on several factors, but it's largely related to which visa they're on and how good their credit rating is.
It may be necessary to apply to the Foreign Investment Review Board (FIRB) for permission to buy real estate; they make decisions based on each individual circumstance.
The amount of money that can be borrowed for a mortgage depends on the lender and the financial climate, but there are several well-known lenders that will only lend up to 80 percent of the value of a property to temporary residents. Expats needing to lend more might need to look for a specialist mortgage broker.
The basic rule of thumb for different visas is that people on temporary resident visas will be able to borrow up to 80 percent; and expats on a Doctor's working visa, permanent residents and people on spousal visas will be able to borrow between 90 and 95 percent of the value of the property.
In the end, the total granted is primarily related to the income of the people applying for the mortgage. Expats will find it easier to obtain a successful mortgage application if they've been working for a couple of months and if they can prove that they've had a sound credit rating in their country of origin.
The good news for expats is that they won't pay higher charges on their mortgage or be offered a different interest rate just because of their visa status, but they will have fewer lenders willing to offer them a mortgage.
It's important to consider both the big picture and a smaller cross-section of one's monthly budget when deciding on the duration of a mortgage. While an expat might get a slightly better interest rate if they agree to pay off their mortgage in less time, it will also mean they pay more each month, so both these factors should be considered carefully and the applicant should make sure they look at all the options available.
Step 2: Choose a location
Selecting in which part of the city to purchase property in is one of the most important parts to buying a house.
Remember, in addition to buying a property in a location they'll love living in, most people also want to buy a property that's going to retain its value so they can make the most of their money. Expats should research and learn about recorded trends in housing prices; look at the median prices in areas they're interested in and see whether or not they can afford to look for properties in that particular location.
As they are unfamiliar with Australia, it may be best for expats to rent property initially until they have a better handle on which parts of the city suit their priorities best. Resale value is important, but by no means should anyone sacrifice their quality of life for a future sale.
Step 3. Find a dream home
Finding exactly the right property is the most time consuming part of the process.
Expats should start by doing their homework while house-hunting. One of the easiest, and most accessible, places to start looking for property is online. Websites like Nestoria.com allow people to look at properties listed with multiple estate agents, and give them freedom to fine tune their search by number of bedrooms, price, garden space, parking, and other features that might affect their decision to buy.
Those looking to buy property in Australia should also keep records of homes for sale, sold and houses passed over at auction – meaning not sold – in their area. This information can reveal trends about where the market is heading, and can help make decisions about how quickly an offer might have to be made or whether one might be better off buying at auction.
Once some preliminary legwork has been done, it's pretty easy to find a real estate agent in Australia; simply walk along any major street in nearly any city and one will more than likely see almost as many estate agents as cafés.
Step 4. Buy buy buy!
Whether bidding for a home at an auction, a popular method of sale, or buying property from a private seller, the formal purchasing process usually involves mediation through the estate agent managing the property.
The buyer, or their solicitor, will approach the agent with a price and they'll act as the go-between with the seller. They probably won't be starting out offering the asking price, and if they've done their homework they'll hopefully have a good idea of what the property has the potential to sell for.
Once a price has been agreed upon, the legal sale documents will be drawn up. These documents will differ from state to state, but it's a good idea for expats to have their solicitor guide them through the process before signing.
If an unconditional contract or exchange contracts are signed without having one's financing fully and formally approved it is very difficult to back out of the contract.
If FIRB approval is required then the buyer needs to include this as a condition in the contract. Again, the solicitor will be the best person to ask about these details. If the buyer uses a specialist mortgage provider they'll often provide a solicitor experienced in these sorts of purchases as part of the agreement.
For your consideration
Expats should note that when buying property in Australia it's necessary to pay Stamp Duty on the purchase price. Expats who are first time buyers - most often the case - may be exempt, but different rules apply in each state so they should consult their state government website.
Be sure to factor in this additional amount when making an offer.
Other fees that will be incurred over the course of the purchasing process are the lender application fee and lenders mortgage insurance; a mortgage registration fee which goes to the government; a land transfer fee; the legal fees that the solicitor will charge; the cost of the conveyancing; and checks on the structure and pest situation.
Once the sale has gone through the buyer also needs to pay for home insurance.
Expats should also realise that the Australian property market can move fast and furiously. For this reason, even once contracts have been exchanged, until everything is finalised, the buyer could still be 'gazumped' by another party offering more. This is considered bad form by some but is an unfortunate reality of buying property in Australia.