Don’t invest in overseas property until you read this

For some, Australia is no longer the best country to invest in. Find out how you can make an overseas property investment work for you.

Investing in overseas property- english house 1

While investing in property overseas comes with a degree of risk, you can enjoy good returns if you know what you’re doing.

In recent years, an increasing number of Australian investors have begun looking beyond our own shores for their property investment needs. As property prices in Australia continue to soar, there are plenty of bargains to be found in overseas markets, and investing in foreign countries can be an effective way to diversify your portfolio.

As with any form of investing, there are potential traps associated with putting your money into property overseas. Here’s how you can minimise your risk and find a safe and productive place to invest your hard-earned funds.

Benefits of investing in overseas propertyInvesting in overseas property - Melissa Louis

Melissa Louis, buyer’s agent and director of Imperio Investments, says there are many potential benefits when investing in property overseas. These include:

  • Lower entrance point to get into investing pool. If you decide to invest in an overseas property market, you can potentially benefit from lower upfront costs and more lenient eligibility criteria to qualify for a loan, “Younger investors may need less deposit and less income to start their portfolio,” Louis says.
  • Generating additional cash flow in another currency. Louis says that investing overseas “adds diversity to your portfolio and the currency exchange rate can be used to benefit your situation”. However, keep in mind that fluctuations in a foreign currency may also represent a risk.
  • Strong capital growth and rental return. These two factors can sometimes be hard to find in Australia, but a well-located property may yield higher capital growth and rental returns than an investor would be able to achieve locally in Australia.
  • Hedge against inflation. As property is a physical asset that represents more than just minimal paper value, it has long been regarded as a good investment to protect yourself against the impact of inflation on your finances. When inflation occurs, house prices and rents increase, which is a win-win for property investors.
  • Personal and monetary value. As an investor, you have the flexibility to use the overseas asset to suit your personal circumstances. “The property itself can be used as a part-time residence or holiday [venue] with the added benefit of utilising the property while increasing in value, rental return and wealth,” Louis says.
  • Tax benefits. Depending on your income, overseas property investment can have benefits at tax time. Seek an accountant’s advice for more information about any tax or depreciable items you can claim.
  • Foreign residency. If you own an overseas property, this may increase your chance of qualifying for residency in the country. “Some countries allow owning a property to qualify [you] for residency visas,” Louis says. “The investment itself can aid in that process of establishing/moving overseas.”

How can I finance an overseas purchase?

Investing in property overseas HSBC 1

The first issue you should be aware of when buying overseas property is that you can’t use an ordinary home loan from an Australian bank to finance the international purchase.

“There are finance companies that aid in helping you find alternate ways to secure finance, some of which have contacts with foreign finance companies as well,” Louis says. “Seek professional advice and search companies that are located in the same country as the property.”

In addition, some banks with branches around the world, such as HSBC, offer services to help you fund overseas investments. As with any other financial decision, you’ll need to shop around when hunting for the right solution for your borrowing needs.

Another issue to consider is that you’ll be exposing yourself to foreign exchange risk, so finding the most affordable way to transfer money overseas is essential. Although there are no controls in place surrounding the amount of currency you can transfer outside of Australia, it’s also a good idea to make sure you won’t be exceeding any foreign exchange controls in the country where you are making your purchase.

Need a real estate agent? Start comparing your options

Provider Details Get in touch
OpenAgent

OpenAgent logo

  • Compare 30,000+ real estate agents
  • Find the right agent and maximise your results
  • Get a free property valuation
Go to siteMore info
Commingle

Logo for Commingle

  • Compare proposals from qualified professionals
  • Access over 45,000 real estate agents
  • Free property valuation profile
Enquire nowMore info
Conveyancing Logo

Fill in your details to get free real estate agent proposals with Commingle

finder.com.au respects your privacy

By submitting this form, you agree to finder.com.au privacy policy

Receive a free property valuation, compare agent commissions and fees and choose the best real estate agent for you with Commingle.

  • Save time and money finding the right agent to sell your property.
  • Commingle is a free service that can negotiate on your behalf to get the best deal.
  • All your details will remain confidential.

How to maximise your investment

Before investing in property — either in Australia or overseas — it’s crucial that you do your research. If you’re going to part with a substantial amount of money and buy a house or apartment abroad, you should be well aware of what you’re getting yourself into.

Ask yourself the following questions:

  • What is the outlook for the economy and the housing market in the country?
  • How have property sales and rental prices performed in recent years?
  • Are there any government regulations or tax implications that could pose a challenge to the viability of my investment?

The list of questions and potential pitfalls is long and confusing, so engaging a qualified buyer’s agent to help you make sense of it all is recommended. “A buyer's agent represents the buyer in the property market,” explains Simon Cohen, co-founder and managing director of property buyer’s agency Cohen-Handler.

“When you sell a property, you hire a real estate agent because they understand the market and are knowledgeable about the inner workings of the industry. It makes sense to have the same level of representation when you purchase a property — whether it's for the first time or when you're looking to purchase overseas.

“A good buyer's agent has strong relationships with real estate agents on the ground and should also be well informed about what is happening in the industry. While you may think it's a good time to buy, without local knowledge and insight, you might not know the right locations to buy or invest in,” Cohen says.

Good buyer's agents can negotiate with vendors behind the scenes, saving time and money and helping the buyer come out ahead.

They will also be transparent and manage the expectations of buyers, providing advice to help you secure the best property that meets your criteria.

“This knowledge is especially important for someone from overseas. Having someone on the ground with the knowledge of the local market to represent these buyers and their needs is integral to their success when investing overseas,” Cohen says.

Another great tip to help you maximise your investment is to use a specialist online money transfer service to help you transfer funds in and out of the country. These money transfer providers offer better exchange rates and lower fees than the banks, and some don’t charge fees at all on large transactions.

You could also benefit by engaging the services of a specialist FX broker who will be able to advise you on how and when you can get the best exchange rate for your international transfer. Even a slight fluctuation in the exchange rate can result in a big difference to your bank balance when you’re sending large sums of money across international borders.

What are some popular investment locations outside Australia?

Investing in property overseas USA

Following the mortgage crisis of 2008, the USA has become a popular investment destination for Australian property buyers. With cheap houses available in cities right across the country, many investors have snapped up potential bargains.

The United Kingdom also attracts plenty of Australian buyers, enticed by falling property prices in the mother country in recent years. Others prefer the security of buying closer to home, which has made New Zealand a popular destination for investors. There’s no stamp duty or land tax to worry about when buying across the ditch, and the proximity of our two countries can provide extra security and peace of mind for buyers.

While these are three of the more popular destinations, it pays to keep an eye out for potential purchases in countries all around the world. Changes to the performance of economies and housing markets in different countries can lead to better investment opportunities becoming available.

What are the risks of investing in overseas property?

  • Lack of local knowledge. One of the biggest risks when investing overseas is that you may not have enough knowledge of another country’s property market to be able to make an informed choice. If a property is listed at a price that just sounds too good to be true, there’s usually a reason for it. If this property is such a sound investment, why hasn’t it been snapped up by a local buyer? In most cases, you’ll need to either get professional help or visit the country yourself to wrap your head around the ins and outs of its property market.
  • Obtaining finance. Unfortunately, obtaining finance to purchase a property in some countries can be a lot more difficult than it is in Australia.
  • Additional costs. You’ll need to be wary of extra fees. “Some countries have certain regulations that are compulsory to pay, which may double up in Australia,” Louis advises. “This may end up costing you more money than initially expected.”
  • The tyranny of distance. Managing your investment property from a distance can be a challenge. Finding the right property manager and suitable tenants on the other side of the world can be difficult.
  • Exchange rates. When deciding whether or not investing overseas is a viable solution for you, it’s important to remember that exchange rates will play a huge part in determining the return on your investment. If the Australian dollar rises in value, your returns could fall, so investing in a country with an unstable currency can be especially risky.
  • Tenants. The majority of countries around the world do not have the same strict rules for tenants and landlords. “In Australia, landlords have deposits and can contact third-party offices (e.g. tenancy tribunals) that allow structure and regulations to abide by,” Louis says. “A typical situation that may happen could be tenants breaking leases without any repercussions.”
  • Set up trips. “Even though a buyer’s agent may help you in securing the property, the bank account set up may need you to travel overseas and open up in person,” Louis says. “Again, this is dependent on which country, but it is beneficial to know beforehand that you may need to fly to the country.”

How is tax treated on overseas assets?

The ATO requires you to pay tax on your worldwide income, so you’ll need to declare any income you earn from your investment property. Some countries also require you to pay tax to their own taxation department as well as to the ATO.

While you can often avoid paying double tax thanks to Australia’s foreign income tax offset system, the whole issue can be quite complex and you’ll need professional advice to make sure that you satisfy all the relevant requirements.

Tim and Natasha buy property in the UK

Investing in property overseas - Tim Harding

Tim Harding, one of the original members of kids’ entertainment group Hi-5, knows from first-hand experience what it’s like to buy property overseas. In 2009, Tim and his wife Natasha purchased a property in the UK.

“We were moving and needed somewhere to live, but property in the UK is very different. Loans are set up differently and property is significantly cheaper outside of major cities like London,” Tim says.

Research and legwork were the two keys to finding the right property to purchase. “My wife did most of the reconnaissance because she travelled over there first while I waited for my visa to come through. She sent me pictures and listings of places she had seen,” Tim explains.

“Most UK houses are typically smaller than Aussie ones, and we had quite a lot of stuff that we were shipping over, so size was a bit of a priority, as was having a garden and being relatively close to public transport. We avoided using agents that we couldn't meet with face to face.”

Now, more than five years on from buying their property, Tim says the purchase has been a successful one. “The upside to investing in the UK is that it’s not difficult to positively gear a property if you have a decent deposit — rent is quite often a lot more than mortgage repayments due to low interest rates,” he says.

“Our mortgage (interest and principal) is being covered by the rent with some left over for maintenance on the property if needed. There isn’t the same return [as in Australia] in terms of property value [as] the market, particularly where we bought, hasn’t really changed a lot since we bought the house.”

Despite the fact that the return may not be as high as it may be elsewhere in the long term, Tim and Natasha would consider buying again in the UK. “We have definitely considered buying another property there just because managing associated costs is so much easier with the loan fully covered by the rent,” Tim says, before going on to offer a wise piece of advice for other Australians thinking of investing in property overseas: “Definitely do your research.”

“Don’t just trust an agent’s advice; wherever possible, talk to locals and find out what local investors do and why. Being a much more population-dense country, prices can vary massively in only a small distance, so knowing the area is really important,” he says.

“If you really want the rundown on the state of play though, marry someone from the UK — it worked out pretty well for me.”


Compare the latest investor mortgage rates

Rates last updated August 17th, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Sharp interest only package rate
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.98%
3.98%
$0
$0 p.a.
70%
Requires a 30% deposit
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
3.91%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.97%
3.99%
$0
$0 p.a.
80%
Competitive investment package loan
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
4.87%
$0
$395 p.a.
90%
10% deposit option available
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
3.99%
5.17%
$600
$0 p.a.
90%
Available with a 10% deposit
Competitive rates for fixed for 3 years with redraw facility.
3.93%
3.94%
$0
$0 p.a.
80%
Competitive investor rate with plenty of features
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
4.14%
$0
$0 p.a.
70%
Competitive investor mortgage for borrowers with a 30% deposit.
4.29%
4.31%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Investors will pay no application or ongoing fees for this interest-only loan.
4.08%
4.09%
$0
$0 p.a.
90%
Low-fee investor mortgage with a partial offset account. 10% deposit option available.
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
Simple, flexible investment product
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Flexible fixed investment loan
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Investor loan with a small deposit option
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Available with a 10% deposit
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Low fee investor mortgage
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Line of credit for investors
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
Rapid online application process
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.14%
4.17%
$0
$0 p.a.
80%
Competitive rate for investors
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
3.94%
3.92%
$0
$0 p.a.
80%
Add an offset account for $10 a month
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.
4.29%
4.27%
$0
$198 p.a.
70%
Lock in your investment rate for 3 years
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.84%
3.91%
$0
$0 p.a.
80%
Flexible low fee mortgage
Enjoy a fast application process and flexible repayment options with this fixed rate mortgage for investing.

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details below to receive an obligation-free quote from an Aussie home loans expert today

finder.com.au respects your privacy

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the finder.com.au privacy policy and the Aussie privacy policy.

Aussie Home Loans is both a lender and a mortgage broker, and offers a range of services.

  • FREE Suburb and Property Report with every appointment.
  • Access 3,000+ loans from over 20 lenders.
  • Get expert help with your loan application, including paperwork and eligibility.
  • Over 1000 brokers who are able to help you in your local area.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 5 years running (2013-2017)

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

Was this content helpful to you? No  Yes

Related Posts

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy.

3 Responses

  1. Default Gravatar
    February 12, 2018

    I am a UK citizen and a NZ citizen by birth. I live and work in Australia (because I am a New Zealander I can stay indefiniatly) and I earn $85000 plus super. I would like to save a deposit in Au and use it to buy a property in the UK, would a U.K bank lend to me if I have a foreign income but I am a British citizen?

    • finder Customer Care
      JoelMarch 1, 2018Staff

      Hi Bec,

      Thanks for leaving a question on finder.

      Your approval for a loan by the bank/lender in the UK would actually depend entirely on that bank/lender you go take out the loan with. If their policy would accept applicants with foreign income, then you have the possibility of getting approved i.e. if they would also see you qualified for the loan and has met their criteria. Best to directly inquire about this with a bank/lender located in the UK though.

      Cheers,
      Joel

    • finder Customer Care
      JoelMarch 1, 2018Staff

      Hi Bec,

      Thanks for leaving a question on finder.

      Your approval for a loan by the bank/lender in the UK would actually depend entirely on that bank/lender you go take out the loan with. If their policy would accept applicants with foreign income, then you have the possibility of getting approved i.e. if they would also see you qualified for the loan and has met their criteria. Best to directly inquire about this with a bank/lender located in the UK though.

      Cheers,
      Joel

Ask a question
Go to site