International Protocols to Australian Residential Property Investment
Many countries across the world have enacted laws to govern and control international, non-resident real estate ownership or investment. These laws are meant to ensure foreign investment boosts the economic growth in a sustainable, non-volatile environment.
In order for Australian real estate acquisition by offshore investment, an international investor must seek prior approval from the Australian Government by the Foreign Investment Review Board (FIRB.)
A person captured in the ‘foreign ownership’ category is:
A foreign person is someone not ordinarily resident in Australia. This includes overseas investors, businesses and student visa holders, a corporation (with specific requirements) and the trustee of a trust estate.
Australian citizens living overseas, foreign persons who hold permanent visas or a ‘special category’ visa (e.g. New Zealand citizens) are exempt from FIRB approval requirements.
Foreign persons who purchase residential property under co-ownership as joint tenants with their Australian citizen spouse are also exempt.
In relation to foreign corporate ownership, a company in which a natural person not ordinarily a resident in Australia or a foreign corporation holds a controlling interest holding of 15 per cent or more or where several foreigners and any associates have 40 per cent or more in aggregate of the ownership are regarded as a ‘foreign owner.’
Exemptions to approval from Australia’s FIRB may include purchasing when/as:
Off-the-Plan Sales -> Developer has approval on your behalf.
Expatriates -> Australian citizens living abroad.
Permanent Residents (visa holders) who are not Australian Citizens
Foreigners married to Australian Citizens
New Zealand Citizens -> Given equal Australian eligibility.
Strata title hotel room
No-exemptions are available to the approval process for residential real estate acquisition when:
International Student Housing >$300,000
Existing House Stock (prior built & resided)
(Approved when 40% of acquisition price ear-marked for redevelopment).
(Approved when continuous construction required within 12 month).
Before you bid from off-shore for Australian Residential Property
Can contracts to purchase be entered into before obtaining approval?
Yes they can, provided the contracts are made conditional upon obtaining approval. If approval is not given this could, at the very least, lead to the loss of the buyer’s deposit.
How long does approval take?
The Board is required to make a decision within 30 days of receiving an application and has up to another 10 days to advise the parties of its decision.
It is imperative to have prior approval to bid at the auction.
In most cases, foreigners looking for a mortgage to buy property in Australia can borrow 80% of the property value.
Rent, Disposal & Tax
Foreign buyers are entitled to rent out properties as desired, sell or gift to other eligible purchasers, or retain for the foreign investor’s own use. Foreign buyers will have to account for Income Tax and Capital Gains Tax on their Australian property investment.
Australia as a Core Property Holding
In February 2014, HSBC surveyed 7,245 High Net Wealth individuals under guidance from RFi Market Intelligence. Results suggests:
37% of affluent Asians currently own an investment property overseas.
Australia is currently the number one destination for offshore property investment among wealthy Indonesians.
Malaysians and Singaporeans ranked Australia second in their direct property holdings.
For the rest of Asia: 9% of affluent Chinese surveyed are invested in Australia, 10% of from Hong Kong and 18% from India are also currently invested in Australian property.
Data & rankings are tabled below as:
Australian Suburbs of Interest
In a closer review to the affect upon Sydney real estate, the top 10 most searched suburbs on Juwai (the largest Chinese international property portal) are:
6. St Ives
8. Hunters Hill
5. Dover Heights
10. Darling Point
Source: Juwai.com, March 2014
CohenHandler also maintain transactional awareness to the outliers of the Juwai list:
“Strathfield set a new record price earlier this week when the home of Ramy Arnaout, co-founder of development and hospitality company Iris Capital, and his wife Nadia, sold pre-auction for $6.8 million. A Chinese buyer snapped up the Llandilo Avenue property.”
Source: Fairfax, 17 February 2014.
The areas of interest within the international community are no surprise as they are high profile, established blue-chip suburbs with low volatility in capital growth. It is worth to note that these suburbs have spanned generations of investment and stock not always apparent. However, CohenHandler can recommend both off-market opportunities in these suburbs and also suggest similar performing opportunities in immediate surrounding areas.
Advantages of Australian Investment
The attraction to the Australian market has been detailed in Asian coverage to central factors of:
Safe Regulation and Governance
Consistent strong Productivity Outlooks
High access to Health Care
World leading Education
Efficient technology adoption
Staggered, tight land release
Low pollution and general high living standards
Preferred retirement destination
Long-term stable yield and capital growth