HOW TO BUY PROPERTY IN AUSTRALIA
The ‘Australian Dream’ has always been seen as owning your own home, a symbol of your success and financial security. Despite this, buying a house in Australia can be a complicated and difficult process for many, including foreign investors seeking to tap into the Australia property market.
At Alan Rigas Solicitors, our expert team of property lawyers can help to ensure that you are given the best possible options and avenues when it comes to buying a home in Australia.
Why invest in property in Australia?
Australia has long been seen by many as one of the most financially stable nations in the Asia-Pacific region with this being reflected in our property markets. For many, property investment has been a lucrative yet relatively safe investment and as a result, property investment is on the rise across the country.
Foreign investors buying property in Australia from overseas has always been a popular investment due to unmatched standards of living, streamlined government purchasing rules and rules to protect consumers and investors.
Can foreigners buy property in Australia / Foreign Investment Review Board (FIRB) rules
Foreigners are able to purchase property in Australia but unlike Australian residents, non-residents must first seek approval from the Foreign Investment Review Board (FIRB).
The FIRB is a federal government office that examines all proposed investments in Australia subject to the Foreign Acquisitions and Takeovers Act 1975 and makes recommendations to the Treasurer about decisions relating to overseas investors buying property in Australia.
Can non-residents buy property in Australia?
As of December 2015, foreigners buying property in Australia are restricted as to the type of property they are allowed to buy. The FIRB rules dictate that non-residents are only able to purchase new dwellings, off-the-plan properties as well as vacant land with the intent to redevelop it.
Non-residents must inform the FIRB of all intended purchases of approval regardless of the type of property.
What types of property can temporary residents buy in Australia?
The FIRB refers to a temporary resident as an individual who holds a visa granting them to stay in Australia for at least 12 continuous months or as a person holding a bridging visa who is waiting on a decision for their permanent visa application.
Similar to non-residents, temporary residents are only able to purchase new dwellings, off-the-plan properties as well as vacant land with the intent to redevelop it. In addition to this, temporary residents are able to purchase an existing dwelling if it is to be their primary place of residence.
Temporary residents must inform the FIRB off all intended purchases of approval regardless of the type of property.
How much do you need to earn to buy a house in Australia?
The amount of money you earn will affect the amount of money you are able to secure to take out a home loan and buy property in Australia. It is generally recommended that you have a 20% deposit saved prior to taking out a loan and purchasing a home.
Buyers are still able to take out a loan with less than 20% of a deposit but will have to pay for lenders mortgage insurance (LMI) which is payable when the loan value is more than 80% of the value of the property you wish to buy.
It is important to speak to a qualified financial professional or broker prior to purchasing property or taking out a loan to ensure that you have the financial security to purchase a home.
Australian Banks and Foreign Lenders
Your ability to secure a home loan from an Australian bank will depend on a range of circumstances include your country of primary residence, your wage, and the currency your income is paid in.
When borrowing, banks and lenders will show favour to potential borrowers that fit their lending criteria but non-residents that do not meet these criteria may still be able to secure a loan most likely at a higher interest rate and/or with a larger deposit.
It is highly advisable to speak to a qualified financial expert prior to purchasing a property or attempting to secure a loan.
The buying process
1. Organise your team of professionals
Purchasing a home is a large and costly investment and as a result, it is important to have a team of qualified professionals helping you along the way.
Organising a conveyancing lawyer is essential to the purchasing of a home as they will be equipped with the legal knowledge and experience to organise all required documents prior to the purchase of your home. In addition to this, a conveyancing lawyer will have the tools to assess all records and documents relating to a property and inform you of any potential risks such a pest and structural issues.
Utilising an accountant and or finance broker is recommended when buying a home as they will have the knowledge of Australian financial laws and regulations and lender requirements to manage your financial affairs. This is particularly useful for foreign investors who will have little-to-no knowledge of Australian purchasing practices and is highly recommended.
2. Evaluate your finances and budget
Prior to purchasing a home it is important to make sure that you’re in a stable financial situation to ensure you will be able to secure a loan and pay off your home.
Sorting your finances and budgeting can be a lengthy process but by doing so you will have a clear understanding of your financial position; you will be able to determine if you are ready to purchase a home and the amount you are able to borrow.
3. Getting home loan pre-approval
It is important to get your loan pre-approved while searching for property so that you are able to secure your loan as soon as you find a property that you are interested in buying.
A home loan pre-approval is highly important as it will give you the guarantee that you are eligible for a loan. The approval will also assist you in working out how much you are able to spend on buying your home.
Obtaining a home loan can be a complicated process, especially for foreign investors and as a result its important to have a qualified professional helping you along the way.
When applying for a mortgage it is important to have all your financials sorted as well as all necessary documents including your payslips and identity documents as well as a list of all of your assets and liabilities.
4. Choosing the suburb and type of property / Finding a property
Finding the right property that suits your needs can be a highly stressful time, especially for foreign investors with little knowledge of Australia’s geography and culture.
When buying a property it is important to purchase one that will meet your needs or the needs of your tenants such as the proximity to schools, shops, hospitals, public transport and leisure areas.
5. Do I need a real estate agent and lawyer or buyer’s agent?
A real estate agent or buyer’s agent is not needed but is highly recommended when purchasing a property as they will have the in-depth knowledge about the area you wish to buy a property in and can help you find your perfect property.
6. Property inspections
A property inspection is a highly important step in purchasing a property as it will allow to you examine the property in close detail. Attending an inspection will help you to determine if the property is suitable for you and will allow you to see any potential risks associated with purchasing the home such as electrical and water faults.
For purchasers not in Australia, individuals are able to organise a property inspection report by a qualified person to do the inspection of your behalf and send you their findings in a detailed report.
7. Preparing for purchase
After finding the home you wish to purchase you will need to seek formal approval for your mortgage and seek any necessary approvals from the FIRB.
Following the securing of all necessary approvals, you will be able to exchange contracts and pay a deposit with the vendor of the property you wish to purchase.
It is important to seek legal advice during this process as the contract process can be complex and litigious.
8. Moving into your new home
Following the process of settlement when the property officially changes hands, the process is officially complete and you will have finished the purchasing process!
The material included in this article is designed and intended to provide general information in summary on purchasing property in Australia, which is current at the time of publication, for general informational purposes only. The material does not apply to all jurisdictions.
This article does not constitute legal advice. This article is not intended to be a substitute for legal advice you obtain from a lawyer and as such, you should not rely upon this article as legal advice or a substitute for legal advice. Buying property in Australia can be a time-consuming and complicated matter which can be overwhelming for some. Contacting an experienced solicitor will provide you with the assistance and guidance you need to meet all the legal challenges face when purchasing a new home. Contact our office to speak with one of our lawyers who can help guide you through the purchasing process in Australia and assist you to with your home buying needs.