Do you dream of buying a property overseas? You might love the idea of having a holiday home to visit whenever you choose. And it can also represent a way for you to diversify your investments as well as earn a regular rental income. But how do you even start trying to find a property overseas? And in which country?
We break down the steps to take when buying a property overseas from Australia as well as some of the risks to be aware of.
You can buy property in countries right across the globe thanks to the Internet, but the best places for you to purchase a property will vary according to a number of factors. These include the performance of the Aussie dollar versus the local currency, housing prices, and the laws and regulations surrounding foreign investment in property in certain countries.
Reach out to a real estate agent or a broker who can guide you through the specific process for the country where you're interested in buying a property.
If you're a cash buyer and have all the funds necessary to purchase an overseas property outright, then great. However, if you can't raise the full amount required to purchase property overseas, you'll need to find a way to secure finance for your investment.
Generally, banks in Australia will provide mortgages for purchasing a property in Australia as they use the property as security. However, banks can't do this with properties overseas and so there's a greater risk to the bank.
You could look for an international bank that provides overseas mortgages or for a bank that operates in both Australia and the country where the property is. And if you already own a property in Australia, there's a chance you could use some of the equity from your home to buy overseas.
Alternatively, you could turn to a bank in the country you plan to buy in to secure finance but this could prove a challenge. For example, you may be limited in how much you can actually borrow or be charged more in interest.
Just as home loan requirements will vary between countries, so too will the property laws. Local knowledge will be key to you staying within the law so it's a good idea to seek guidance from local experts. Real estate agents, home loan brokers, accountants and even lawyers could all help you understand what your options are.
You'll need to understand a variety of different things when purchasing a property overseas including taxes, official procedures, laws and regulations, among others.
You may be liable for paying tax in the country where your property is located, especially if you plan to rent it out.
It's also worth noting that any income you make from renting out an overseas property or any capital gains you make must be declared to the ATO.
If there's a double tax agreement with Australia and the country where your property is located, you may only need to pay tax in one country. Check the rules carefully. It could even be worth speaking to an accountant about saving money by either paying in Australia or the local country.
Keep in mind these procedures, laws and regulations are constantly changing, or maybe too complex to understand on your own, so it's wise to seek advice from professionals to ensure that you're fully aware of the market you'll be getting into and the commitment you'll ultimately be making.
When transferring money overseas, you have a couple of options including:
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How much you spend on your overseas property can be massively affected by the exchange rate. Exchange rates are constantly fluctuating, so the best time to purchase an overseas property is when the rates are in your favour so your Aussie dollar buys you more.
And if you plan on renting your overseas property out, remember that the fluctuating exchange rate could also affect any income that you'll receive, which could see your income vary wildly from one year to the next.
To help you get the best rates and lowest fees for sending your money between the country where your property is and Australia, consider using a specialist money transfer company.
Some countries might be more appealing to you simply because the planning involved in buying overseas might be more straightforward. You'll also want a country that has a stable economy with no political volatility brewing.
For example, the UK and the US both allow foreign investors to purchase property and there's also no language barrier, so communication won't be an issue.
If you have the cash up front, Japan is another option. And so is France. But the language barrier may prove challenging.
But if you want something closer to home, New Zealand could be a good investment.
It's a challenge to come up with a definitive list of countries difficult to buy a property in as it depends on your own circumstances.
Some countries will have restrictions on who can buy a property while others won't. So you'll need to check that you as a foreign investor can buy property in the country and go from there.
For example, Canada and Thailand don't allow foreigners to own property but buying in Mexico and Greece, while possible, can leave your head in a spin and jumping through hoops.
Language may also be an issue, especially if you don't speak the local language so you'll need to find professionals who speak English and the local language to get by.
The location of the country in relation to where you live is also a huge factor, you don't want to find the perfect overseas property if it's on the other side of the world and will cost an arm and a leg to get to.
Buying an overseas property could be seen as a good idea for a number of reasons. With real estate prices continuing to rise in many Australian cities, your money might go much further in another country. And if it's in a desirable location, you may even decide to rent it out and make a regular rental income from it.
On the flip, there are considerations you'll want to make such as selecting the right country, securing finance for the property, looking at the currency exchange between your AUD and the local currency and the potential for renting the property out.
You will also likely need to do a whole heap of research to work out if buying overseas is a good idea for your own circumstances.
Gaining citizenship or permanent residency in a country doesn't automatically happen when you buy a property overseas. Some countries just simply don't offer this while others do if you meet the necessary requirements. Here's a list of some countries that can grant citizenship for investing in real estate:
As with most research nowadays, turn to the Internet to begin your search for a real estate company that works with global properties. Some reputable real estate firms that are worth researching include RE/MAX, Century 21 and Sotheby’s International Realty.
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