Purchasing overseas properties has been rated as one of the best investment for many investors. Not only it is almost risk-free for Australia properties, investors have been earning a stable and good investment return from it. Since the current rules and laws which had kicked in since the surge of Chinese buyers purchasing Australia properties, property investment is still seen to be worthwhile .
Australia is still one of the safest haven for real estate investment with Australian government going hard on rogue developers. With this in mind, investors are more willing to put their eggs in Australia. However, potential home buyers should still use their own due diligence in learning what to expect when it comes to financial commitment.
Cost to prepare before making decision
Cost of purchasing a typical apartment (Based on a AUD$500,000 property with LTV of 60%, can go up to 70% LTV for most cases) as of 20th Feb 2019
- $50,000 (10% down payment including reservation fee)
- $150,000 (30% payable on Settlement)
- $5,600 (Foreign Investment Review Board application fee)
- $27,500 (Local Stamp Duty based on conservatively 5.5%,, may vary based on each home)
- $35,000 (Foreign Levy based on 7%)
- $2,000 approx. (Legal Fee)
- $2,000 approx. (Title Registration + Disbursement Fee)
Estimated Cash needed: $272,000
The payment of cash is not all upfront, most part of the payment are during the Settlement day which is the building completion day. All payments towards the developers are being held and locked in a Trust account which is usually managed by your solicitor. In the event of developer defaulting their part of the contract or go bust. All these money in the Trust account will be returned back to the buyers with interest of 2% per annum. This is why Australia properties investment is safe as this is the law set by Australian government to deter rogue developers.
Based on the calculation we did, $72,000 is the amount payable other from the down payment of 40% of the apartment selling value. So why are investors still buying when they have to lose that $72,000 due to fees and taxes? Because they well know that the potential rental yield and capital gain returns is much much more than those taxes, fees and bank interest if they hold the property for more than 6 years. The above table shows the median capital growth and rental yield, when you compound those values based on your buying price with a financial calculator, after deducting your annual bank interest, maintenance fee, property tax and even capital growth tax when sell off that property, you would easily make back when you paid for at the first place.
This tells us that we must be able to hold that property long enough to be profitable. Australia properties for foreigners’ investment is not for speculation anymore. It is for foreign investors who could long-hold those properties. I hope this article does help you to understand more about Australia properties investment. Do contact us if you want to understand more about Oversea Properties investment or even retirement.