International guide to investing in Australian property
While property investment in Australia can be a rewarding experience, it’s not necessarily an easy path to riches.
If you’re thinking about investing in Australian real estate, here’s our quick guide to get off on the right track.
Do I qualify?
To buy an established property, you must have been a resident for at least 12 months or be buying in partnership with a resident if you meet certain conditions. If you do not qualify as a resident, you may still be able to a newly developed property.
What about taxes?
You will usually pay a tax, known as Stamp Duty, of .3% to 2.5% of the purchase amount, depending on where the property is. You may also have to pay an annual land tax if you own property worth more than a certain amount.
These taxes vary between states and territories, so visit the relevant government website to see what taxes will apply to you.
Read more: Understanding stamp duty
A capital idea
The rental yields from investment-grade property in Australia are quite low by international standards, between just 3.5% and 5% gross.
The way to make real money from Australian property investment is through capital growth and the best returns are made on properties in high demand but limited supply.
Read more: What is yield?
Set in the city
Most investment grade property is located in large Australian cities, particularly Sydney, Melbourne, Perth and Brisbane.
Newcastle in New South Wales and Geelong in Victoria have improved their returns over the last decade, and Darwin, the capital of the Northern Territory, has been a top performer for the last 10 years.
Coastal areas like Queensland’s Gold Coast, Port Douglas and mining towns like Port Headland in Western Australia have a history of stellar capital growth followed by slower periods.
For apartment investors, the best locations are mostly in suburbs 4 – 8 km from the CBD.
For houses, the best locations tend to be a little further out, around 6 -12 km from the centre.
Target a location within walking distance of a village-style shopping strip and close to public transport, parks, schools and entertainment areas.
Get low down
While shiny new towers are a favourite for investors in Shanghai, Jakarta and Manila, in Australia, the best growth tends to come from low rise properties.
In most cases, high rise towers come with big owners corporation fees and plenty of competition when it comes time to sell. Low rise buildings, on the other hand, benefit from with lower maintenance costs and higher land content values.
In Australia, the best growth tends to come from low rise properties.
While studio-sized apartments in Manhattan and London and sprawling mansions in Los Angeles or New Delhi are favoured by investors; these properties don’t tend to perform well in Australia.
Investors should target apartments which are at least 50 square metres in size, townhouses with a private courtyard and small to middle sized houses with a separate living room and an outdoor area.
Right in the middle
You may be tempted to think the best investment is a multimillion dollar house on Sydney Harbour or a cheap as chips apartment in Adelaide’s northern suburbs.
Well think again.
The best performing properties tend to be clustered around the median price – about 20% above or below.
The local vibe
If you’re new to Australia, don’t rush in and buy the first property you see.
Get to know the city you’ve targeted or consider using a local buyer agent to help you with your search. And make sure they’re not salespeople tied to a particular developer but truly independent with your best interests at heart.
Read more: Australia’s hottest suburbs October 2013
If you want to see if you qualify to buy established property in Australia, check with the Foreign Investment Review Board at firb.gov.au/content.asp