Due to the relatively high prices of private residential property in Singapore and restrictions on HDB ownership, you might be thinking of investing in overseas property.
Australia has long been a popular location for Singaporeans to buy investment properties, with cities like Perth and Melbourne, as well as the surrounding suburbs, being particularly popular. The fact that Australia has been largely spared by the COVID-19 pandemic makes it an even more attractive investment destination.
Australia’s proximity to Singapore and its more relaxed pace of life are some of the factors that have endeared it to Singaporean investors and expats. The housing market is considered very stable and has enjoyed consistent capital appreciation over the years. In addition, there is a continuing shortage of homes in the capital cities, which boosts rental yields.
The country also enjoys a relatively low population density, which makes owning landed property a possibility that many Singaporeans can only be dream about back home.
On the downside, over the years, Australia has made it more difficult for overseas investors to buy property in order to curb rising property prices. Here’s what you need to know to buy an investment property in Australia.
Related article: Guide to Buying Overseas Property in UK
About Buying or Investing in Property in Australia
Many Singaporeans hire an agent to help them source for suitable properties, negotiate prices and handle the paperwork. You can also use an agent to manage the property and look for tenants in your absence.
When you have found a property you wish to purchase, you will first have to apply for approval from the Foreign Investment Review Board (FIRB). You will also need to pay a four- or five-figure application fee which is pegged to the value of the property you are buying. The approval process can take up to 4 weeks, but 2 weeks tends to be typical.
Eligibility: What Australia Properties Can You Buy?
There are stringent rules about what types of residential investment property foreigners can purchase in Australia. These are limited to:
- Under-construction or new buildings
- Vacant land
- Established dwellings to be demolished and replaced with a greater number of dwellings
Under construction or new buildings
Foreigners are by and large prohibited from buying property on the resale market, but can buy property in new buildings or under-construction developments. You must be the first owner of the property.
Vacant land
Foreigners are generally allowed to buy vacant land that has not previously had a home built on it. You will have to complete construction of your property within four years.
Established dwellings to be demolished and replaced with a greater number of dwellings
Foreigners are generally not allowed to buy established dwellings or resale property. One exception is if you plan to knock it down and build a larger number of homes on it. For instance, you might knock down a house and build two smaller houses in its place.
The above applies to foreign investors who are not residents in Australia. However, if you live in Australia on a temporary basis (ie. you are not a Permanent Resident), you can buy an established dwelling or resale home to live in. When you leave Australia, you will have to sell the home.
Fees and Costs: How Much More Must You Pay to Buy Property in Australia?
The typical downpayment in Australia tends to be about 20%. However, it is often possible to commit to a property purchase for less, with some downpayments being as low as 5%.
As mentioned earlier, you will need to pay a fee when you submit your application to the FIRB.
|
Property value |
FIRB fee |
|
$1,000,000 and below |
$5,700 |
|
$1,000,001 – $1,999,999 |
$11,500 |
|
$2,000,000 – $2,999,999 |
$23,100 |
|
$3,000,000 – $3,999,999 |
$34,600 |
|
$4,000,000 – $4,999,999 |
$46,200 |
|
$5,000,000 – $5,999,999 |
$57,700 |
|
$6,000,000 – $6,999,999 |
$69,300 |
|
$7,000,000 – $7,999,999 |
$80,900 |
|
$8,000,000 – $8,999,999 |
$92,600 |
|
$9,000,000 – $999,999,999 |
$104,100 |
|
$10,000,000 or more |
Contact Australian Tax Office for fee estimate (fees are tiered per million) |
Other than the above, you will need to budget for other costs such as legal fees and the various associated costs such as transfer fees and mortgage registration fees. Stamp duty might also be payable, the cost of which will vary depending on the state where your property is located.
You might also have to pay an additional land tax as a foreign investor who is not residing in your property. This varies from state to state.
Once you have purchased the property, you will be subject to council charges, which are usually collected from homeowners on an annual basis, to be paid either in four installments or in a lump sum. Council rates are determined by the municipal council in which your property is located.
Application Process: How to Buy Property in Australia
- Sign contract with the seller/developer
- Submit FIRB application online
- Once approved, proceed with property transaction
- It’s best to hire a lawyer to help with the paperwork and legal processes
When you have found a property you wish to purchase, you may sign a contract for sale with the seller or developer. Make sure there is a clause stating that the agreement is subject to FIRB approval.
You can then submit your FIRB application online. Once approval from the FIRB has been obtained, you can go ahead with the property transaction. Your lawyer should handle the rest of the paperwork and alert you to payment deadlines.
Financing: How to Pay for The Property in Australia
When seeking financing for a property in Australia, you can choose between a loan from a bank in Singapore or one from a bank in Australia. Do note that you cannot use your CPF savings to pay for overseas properties.
Australian banks will typically only lend to you in AUD. As a foreigner, you may be at a disadvantage when seeking financing from banks in Australia. For instance, you may face more stringent income requirements or be excluded from the most competitive interest rates.
Home loans from Singapore banks will typically give you the chance to choose between SGD and AUD. Should you decide to take out a loan from a Singapore bank, be aware that the Total Debt Servicing Ratio (TDSR) will apply. That means your total debt obligations, including other loans and credit card debt, cannot exceed 60% of your gross monthly income.
Buying Australian property can be an exciting journey. However, don’t forget that you may need to evaluate overseas property using different yardsticks than you would use for local property. Be sure to carefully research any locations where you are considering buying property and, if possible, make a trip there yourself.
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