Buying Property in Australia

For many, buying property is synonymous with ticking boxes and filling out forms. Such a large purchase certainly deserves its fair share of red tape, and if you're an expat looking to become a home owner in a country other than your own you'll have to be ready to take on a whole new set of rules and regulations.

According to a recent HSBC Expat Explorer Survey, 49% of expats in Australia opt to buy property. With such a large percentage of the population committed to purchase, it's certainly worth examining what it takes to follow in their footsteps.

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 your budget and arrange a pre-approval for your mortgage

For the odd expat who's pursued and been granted permanent residency status, Australia has something called a First Home Owners Grant, a stipulation that entitles eligible applicants to a once-off grant of $7,000 to put toward their first home.

It's certainly a nice chunk of change to add to your nest egg, but chances are you 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 obtain a mortgage depends on several factors, but it's largely related to which visa you're on and how good your 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 you can borrow 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% of the value of a property to temporary residents. If you need to lend more you might need to look for a specialist mortgage broker.

The basic rule of thumb for different visas is that people on a subclass 457, a 422 visa and other temporary resident visas will be able to borrow up to 80%; and expats on a Doctor's working visa, permanent residents and people on spousal visas will be able to borrow between 90 and 95% 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. As an expat, you'll find it easier to obtain a successful mortgage application if you've been working for a couple of months and if you can prove that you've had a sound credit rating in your country of origin.

The good news for expats is that you won't pay higher charges on your mortgage or be offered a different interest rate just because of you visa status, but you will have fewer lenders willing to offer you a mortgage.

It's important to consider both the big picture and a smaller cross-section of your monthly budget when deciding on the duration of your mortgage. While you might get a slightly better interest rate if you agree to pay off you mortgage in less time, it will also mean you pay more each month, so consider both these factors carefully and make sure you look at all the options available.

Step 2: Choose your location.

Selecting in which part of the city you'd like to purchase property is one of the most important parts to buying a house.

Remember, in addition to buying a property in a location you'll love living in, most people also want to buy a property that's going to retain its value so you can make the most of your money. Do your research and learn about recorded trends in housing prices; look at the median prices in areas you're interested in and see whether or not you can afford to look for properties in that particular location.

As an expat unfamiliar with Australia, it may be best to rent property initially until you have a better handle on which parts of the city suit your priorities best. Resell value is important, but by no means should you sacrifice your quality of life for a future sale.

Step 3. Find your dream home

Finding exactly the right property is the most time consuming part of the process.

Start by doing your homework while house hunting. One of the easiest, and most accessible, places to start looking for property is online. Websites like Nestoria.com allow you to look at properties listed with multiple estate agents, and give you the freedom to fine tune your search by number of bedrooms, price, garden space, parking, and other features that might affect your decision.

Expats 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 your area. This information can reveal trends about where the market's heading, and can help you make decisions about how quickly you might have to make an offer or whether you might be better off buying at auction.

Once you've done some preliminary legwork it's pretty easy to find a real estate agent in Australia; simply walk along any major street in nearly any city and you're more than likely to see almost as many estate agents as cafés.

Step 4. Buy buy buy!

Whether you find yourself 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 though the estate agent managing the property.

You, or your solicitor, will approach the agent with a price and they'll act as your go-between with the seller. You probably won't be starting out offering the asking price, and if you've done your homework you'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 to have your solicitor guide you through the process before you sign.

If you sign an unconditional contract or exchange contracts without having your financing fully and formally approved it is very difficult to back out of the contract. 

If FIRB approval is required then you need to include this as a condition in the contract. Again, your solicitor will be the best person to ask about these details. If you use 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 consult your state government website.

Be sure to factor in this additional amount when making your offer.

Other fees that you'll incur 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 your solicitor will charge you; the cost of the conveyancing; and checks on the structure and pest situation.

Once the sale has gone through you'll also need to pay for home insurance.

Expats should also realise that the Australian property market can move fast and furiously. For this reason, even once you've exchanged contracts, until everything's finalised, you 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.