SMATS, experts in Australian taxation, answers your questions.
Is it true you can’t get a loan to buy Australian property unless you live there?
Australia’s property market has allowed foreign investors to benefit from constant access to favourable lending options for years.
However, a recent surge in foreign investor activity has caused a rethink in lending policy that affects all nationalities. As such, anyone looking to buy a property while living abroad or in preparation for migration to Australia must know the new lending environment.
Can I still get a loan?
Many banks have now stopped lending to foreign nationals as an internal policy decision. The rules have also been tightened for Aussie expats, but it is not impossible to get a loan.
You will just need to shop around or consider using an expert finance consultant. This will give you access to all of the lending options. But make sure you know all of your choices. Look for a finance broker who is experienced in lending to overseas buyers and migrants in order to get a loan suited to your needs.
How much can I borrow?
The amount has been reduced to 70 percent for non-Australian buyers.
Likewise, take into account the additional Stamp Duty for foreign buyers in Victoria (7 percent), New South Wales (4 percent) and Queensland (3 percent) as well as the usual purchasers Stamp Duty, which ranges from 2 to 6 percent.
The Federal Government also introduced a foreign buyer’s fee of A$5,000 for purchases less than A$1 million last December that rises as the property value increases.
The combination of lower levels of finance and higher entry costs may significantly impact your purchasing budget, so it is best to seek a pre-approval of your loan so you know how much you can afford when looking at property options.
However, the State and Federal Fees do not apply to Australian citizens or permanent residents.
What are the costs of getting a loan?
Most banks will charge an application fee of approximately A$600 to A$1,000, which includes all legal fees, documentation and a sworn valuation of the property.
Your broker should not charge you fees for assisting you – if he or she is appropriately licensed, the bank should pay them a referral fee. You will also need to pay a lawyer or settlement agent to attend to the exchange of your property and ensure all documentation is in order. This isn’t part of your loan costs, but is necessary to transfer the property correctly to you and usually costs between A$1,000 and A$3,000.
From The Finder, October 2016
Steve Douglas is the Co-Founder and Managing Director of Australasian Taxation Services (ATS). ATS provides specialist taxation services for anyone looking to invest in Australian property, including Australian expatriates living overseas. Areas of specialisation include the Australian taxation aspects of property investment, as well as expatriate and migration planning.