Buying Property in Australia
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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 homeowners in a country other than their own will have to be ready to take on a whole new set of rules and regulations.
When buying property in Australia, expats should note that the process will vary from state to state, but there are some general steps that apply on a national level. Here's an outline of what to expect.
Step 1: Calculate a budget and arrange mortgage pre-approval
Before starting the house-hunting process, expats should check whether they need to apply to the Foreign Investment Review Board (FIRB) for permission to buy real estate.
When it comes to financing, 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 Australian credit rating is. 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 on the downside, 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 is one of the most important parts of 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 and look at the median prices in areas they're interested in to 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. There are websites that allow people to look at properties listed with multiple estate agents, and give them the freedom to fine-tune their search by the number of bedrooms, price, garden space, parking, and other features that might affect their decision to buy.
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 or buying a 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.
Additional aspects to consider
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 vulnerable to another party offering more. This is considered bad form by some but is an unfortunate reality of buying property in Australia.