Buying real estate in Australia as a foreign investor

The real estate market in Australia is currently considered to be overvalued by many experts and some even believe that a decline in property price growth is to be expected in the coming 12-18 months, due to the oversupply of residential properties in many of Australia’s largest cities. Nonetheless, that is not preventing more foreign investors piling money into Australia’s popular real estate, most notably investors from China.
 
Strong Chinese demand for Australian real estate
 
Investment in Australian real estate from Chinese foreign investors has doubled in the last financial year according the annual report of Australia’s Foreign Investment Review Board. Chinese investors spent USD 18 billion on Australian property last year, three times as much as the United States. Chinese investment has helped boost the residential real estate sector in recent years and this is unlikely to stop soon.
 
According to Chinese global property investment platform Juwai.com’s CEO Charles Pittar, on the topic of Chinese investment in Australian property, “there is immense pent-up demand. China’s share has risen from less than one-tenth to more than one-quarter of all of foreign real-estate investment in Australia since 2012. There will be ups and downs, without a doubt, but the long-term trend is up.”
 
The second biggest foreign investor in Australian property was the United States, as American benefited from a weaker Australian dollar and a stronger US dollar, which made Australian property purchases cheaper for US buyers. Americans invested around USD 7 billion in Australian real estate last year.
 
Buying property in Australia as a foreign investor
 
If you want to buy real estate in Australia, as a foreign investor, it is imperative that you choose the most optimal way to pay for your property investments. In this case that includes two aspects: finding a suitable local loan provider and choosing a low-cost option for your international money transfers to Australia.
 
Firstly, when it comes to finding the right loan provider for your mortgages it is wise to choose a local mortgage lender that offers you a mortgage deal with a reasonable interest rate and a down payment that fits into your investment strategy. It’s unwise to use a mortgage provider in the United States, as opposed to a local Australian lender, as you will most likely receive a better mortgage deal locally. Also, the value of your property is in Australian dollars while your mortgage would be in US dollars. This would increase the currency risk in your real estate investment portfolio.
 
Secondly, when you purchase property in Australia you will need to pay for it in Australian dollars. That means you will need to transfer your US dollars into Australian dollars. This is an area where you can easily decrease the overall return on your property investment, if you don’t choose a low-cost currency exchange and money transfer solution. If you make your international money transfers using your local bank you will be charged substantially higher fees, than if you use a commercial foreign exchange company to conduct your transaction. Commercial FX companies specialize in currency conversion and international money transfers and are able to provide you with access to fair exchange rates and offer low-cost cross-border money transfers. Using commercial FX companies to handle your transfers from US dollars into Australian dollars will allow you to save money on the currency aspect of your foreign real estate purchases.
 
Finally, you also need to be aware of the fact that foreign investors require governmental approval to purchase real estate in Australia. All property purchases by foreigner investors have to be put in front of the Foreign Investment Review Board (FIRB) for approval.