Guide for Australian Expats: Buying Property in 2023 – As 2023 unfolds, many Australian expats are keen on buying property in Australia.
This could be for investment purposes or as a potential primary residence.
Thanks to this shift and a declining AUD, expats now have a broader property selection and better negotiation leverage. This also means a more favorable AUD cash flow for many.
Steps to Buy Property from Abroad
- Assessment: Begin with a comprehensive credit evaluation, considering income, assets, expenses, and liabilities. Convert foreign financial data to AUD for loan considerations.
- Overseas Expenditures: Account for rent, credit cards, loans, and daily living costs, including education, health, and travel.
- Down Payment: Aim for a 20-30% deposit. Some lenders might accept 10%, but a larger deposit opens up more options.
Acquiring a Future Primary Residence from Overseas
Initially, this property is seen as an investment since foreign income is used for the loan. However, once you return to Australia and move in, you can show proof of residence, prompting the bank to reclassify the loan, leading to reduced interest.
Buying Property with a Non-Australian Spouse
Many expats have non-citizen spouses, complicating property purchases. It’s crucial to understand the “foreign person” definition both federally (via the FIRB) and at the state level, as each state has its own rules and potential surcharges.
Non-citizen ownership might attract an extra 7-8% stamp duty.
Foreign Income and Loan Servicing
Lenders convert and adjust your foreign income. The discount rate depends on the currency and the lender’s policy.
Typically, there’s a 20% reduction for FX risk. For those in low-tax regions, like Dubai, it’s vital to choose lenders that consider net income to ensure accurate borrowing capacity.
Lowering Your Australian Mortgage Interest Rate
With the RBA’s 2022 rate hikes, many saw their interest rates soar by 3.5-4%. However, Australian banks are still eager for new clients, offering refinancing options and even cash incentives.
Choosing the Right Loan Structure
In Australia, you can opt for variable or fixed loans or even a combination. Variable loans with an offset feature can be beneficial, especially in a high-interest scenario.
For instance, with a $500,000 mortgage and $100,000 in an offset account, you’d only be charged interest on $400,000.
Assembling a Stellar Team for your Property Purchase
A successful property purchase requires a competent team. This includes a knowledgeable mortgage broker familiar with expat needs, a buyer’s agent to assist in property selection and negotiation, and and a financial planner who can provide advice on the cash flow of the loan as as well considering any tax implications of the purchase.