Australia is a popular destination for ex-pats and immigrants who want to build a new life. Indeed, according to the Australian Bureau of Statistics, around 667,000 people moved Down Under in the financial year of 2023-24.
Note: Attracted by the country’s high quality of life, stable economy, and multicultural society, it’s no surprise that many of them eventually want to buy a home in the ‘Lucky Country’. However, if you are not a citizen of Australia, the process of purchasing a property might not be as straightforward as you think. For this reason, understanding the legal and financial requirements involved in it is something you will need to get your head around.
That’s why we have put together this guide, which will walk you through some key considerations when navigating the process.
Understanding Foreign Investment Rules
In Australia, the government regulates all foreign investment in residential property through an organisation known as the Foreign Investment Review Board (FIRB), and, if you are a temporary visa holder or a foreign national, you must seek their approval before you can purchase something.
Note: The FIRB typically only allows foreigners to purchase newly built homes, vacant land for development, or established properties under specific circumstances, such as if you're buying with a spouse who is an Australian citizen.
For permanent residents and New Zealand citizens with a Special Category Visa (subclass 444), FIRB approval is generally not required. That said, it’s always a good idea to check the latest regulations, as rules can change without much notice based on government policy.
Financing Your Home Purchase as an Immigrant
Securing a home loan is hard enough for those born in Australia and often involves having a 20% deposit of the total purchase price in cash savings.
But it can be even more difficult for immigrants, as Australian banks have strict lending criteria. Generally speaking, if you hold permanent residency, you will likely be treated similarly to Australian citizens when you apply for a mortgage. However, if you are on a temporary visa, your options may be more limited.
Tip: Before you begin the home-buying process, it’s essential to open a bank account in Australia, as this will be necessary for handling deposits, mortgage payments, and all legal transactions.
These days, most banks allow non-residents to open an account online before arriving in the country, but you will need to provide identification and proof of visa status to be able to do so.
Choosing the Right Property
Once you have your finances in place, you’ll need to decide where to buy.
Note: You should be aware that the current mean house price in Australia is $985,900, although this figure will vary by state and city.
Major cities like Sydney and Melbourne have some of the highest prices in the world, and you can check their median property prices here. Therefore, if affordability is a concern, consider looking at growing regional areas, such as Geelong in Victoria or the Sunshine Coast in Queensland, where property prices are a little bit lower while the lifestyle benefits remain high.
It is worth researching local market trends, infrastructure developments, and future growth prospects to determine the best location for you to live. You might also want to engage a buyers’ agent, particularly if you’re unfamiliar with the Australian property market.
Legal Obligations
Once you have found the right property, you’ll need to put in an offer and agree on a purchase price. If accepted, you will then have to sign a contract of sale.
This process varies by state across Australia but typically involves paying a small deposit (sometimes as little as $1000) and going through a settlement period, usually of 30 days.
The legal side of the transaction can be quite complicated, so it’s advisable to hire a solicitor or conveyancer to handle the paperwork, and ensure the process goes smoothly.
Other costs which may be applicable to a foreign buyer, include stamp duty, legal fees, and potential FIRB application fees.
For those who are buying their first property, some states offer stamp duty concessions, so you should check if you’re eligible for any government grants or discounts.
Tax Implications
You should be aware that foreign property buyers may be subject to additional taxes, above and beyond those imposed on Australian citizens.
These taxes vary by state and may include Foreign Investor Surcharge Stamp Duty, which can add a significant cost of upwards of 8% to your purchase price.
Tip: It is worth seeking the professional advice of an accountant to help you understand your obligations and also best structure your investment to your advantage because if you plan to rent out your property, you will also need to pay income tax on rental earnings.
Should you ever sell the property for a profit, you might also be hit with capital gains tax (CGT).
Build a Good Credit History
When it comes to assessing your suitability for a mortgage, your credit history is something banks will look at.
The better your credit history, the more it will improve your chances of securing a home loan with favourable terms.
Tip: Before you are ready to buy, it is a good idea to build up a strong credit profile. You can do this by opening an Australian credit card and making sure you pay the full balance off on its due date, paying utility bills and rent on time, and not taking on too much in the way of debt.
You can check your current credit score here.
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