FAQs

1.If I am a foreigner, can I still buy property in Australia?

Yes, you can buy residential and/or commercial property but its subject to the approval of the Australian Foreign Investment Review Board (FIRB), the updated legislation are as follows:

  • If you are a foreign resident you cannot buy an established residential dwelling in Australia, either directly in your name or through a trust relationship or company structure. Penalties apply for breaching this rule. (exception applies; refers to guide: http://firb.gov.au/resources/guidance/gn03/)
  • You can buy other types of Australian residential property, such as new dwellings, vacant land and property that is to be redeveloped, but you must first get approval from the Foreign Investment Review Board.v
  • If you are a temporary resident you can buy 1 established dwelling if you use it as your residence in Australia and get approval from the Foreign Investment Review Board.

2.What expenses are usually involved when buying an Australian Property?

  • Land Tax: depends on the value of the land, usually a few hundred dollars, also varies from state to state. Your conveyancer will go through this with you when signing the contract of sale.
  • Body Corporate, Council and Water Rates are usually 1% of the market value of the property.
  • Property insurance fee: For apartments, the insurance fee is included within the body corporate (coverage only for common area such as sky lounge/ swimming pool/ gym facilities) but for the internal area of the unit, the owner would need to purchase themselves.
  • Stamp Duty: purchaser needs to pay up to 5.5% of the property price as stamp duty depends on the construction stage of the property at the day when the contract was signed.
    **Note that 01/7/2016, Victoria Govt. has announced that part of the stamp study concession is applicable only for owner occupier (Citizen/PR).
    Reference Link: https://www.finder.com.au/new-victorian-government-initiatives-for-first-home-buyers
  • New legislation 1st of July 2016 – VIC: Foreign Investor incur an additional 7% stamp duty
  • New legislation 1st of July 2016 – VIC: Foreign Investor incur a 1.5% additional land tax
  • New legislation 1st of December 2015: FIRB application fee begins from $5000 AUD for properties under 1million and increases if over 1 million. (Over 1million; every 1 million is $5,000 AUD)

3.Australia

What are the advantages of buying “OFF THE PLAN” properties?

Stamp duty savings in some states
State governments (in certain states) offer bonuses and reduction in stamp duty for buying off the plan which can save you thousands of dollars.

Tax Advantages
If purchasing for investment purposes, you may be able to claim depreciation on your tax for items like fixtures and fittings. Consult our tax accountant to get a full depreciation schedule once your property settles.

Repair cost savings
It goes without saying that a brand new home – if well built – will not need the ongoing maintenance that an older property often needs.

Potential capital gains
Buying off-the-plan allows you to buy at today’s price. In a rising market, this can mean you own a property worth more than you paid for it by the time the deal settles after construction.

However buyers should view this as “a nice little bonus” not the reason for buying off-the-plan, Simms cautions.

“This can be good, if the value has increased; and it can be bad, if the value has dropped,” agrees Chris Owen, Principal of property maintenance and finance company DRG Property.

“If the value goes up by 20% or 30%, then the biggest concern you’ll have is how to spend the money and whether you should console the developer who wished he’d priced higher … send him a nice Pinot and some tissues.”

Buys time for buyers
Buying off-the-plan is one of the easiest ways to get into the property market.

You only need a 10% deposit today and can pay the balance of the purchase price at settlement, once construction is complete (which might take six months or longer).

Savvy buyers use this time to save towards moving costs, furniture, the home and the house-warming party.

“With more savings to put towards your new property you will be able to borrow less and therefore your loan repayments will be much lower,” Simms adds.

(Source Reference: www.realestate.com.au & www.domain.com.au)

4.How does the loan application works?

Apartments:

Generally, all loan application for residential apartments in Australia is through a 10/90 contract.

What is 10/90?
Is also referred as turnkey contract 10% deposit & 90% upon settlement 10% of deposit monies are held in Trust account of solicitors and are not provided to developers.

House & Land (Townhouses):
Loan application for House and Land projects (Townhouses) are most of the time by split contract, which means anyone wishing buy a lot off the plan is required to sign 2 contracts, one for the land purchase and the other for the construction of the dwelling on the land acquired. However, not all townhouses are settled through split contracts. Some developers do offer a turnkey contract for townhouses as well.

5.Buyers of off-the-plan property are often concerned when they see the Sunset Clause included in the Contract of Sale.

Sunset Clauses are usually included as a way of protecting the interests of both parties when it comes to a sale.

What is a Sunset Clause?
The Sunset Clause is the statement in the Contract of Sale that refers to the maximum time in which the developer has to finish the project. This time varies across developments, depending on the size of the property. If your property is not finished by this time, you are legally entitled to walk away from your contract and receive your deposit back in full.

What is the time limit?
The Sunset Clause is the maximum time it will take to complete the project and generally it will be finished well within this time.  The exaggerated time frame is there to allow for any delays the developer may experience such as industrial action, inclement weather or development funding delays.

Before you sign on it’s worth asking the developer or their representative if all permits for the development have been obtained. This is an area that may cause an extended delay, if the development gets held up in the planning process.

Are there any risks?
From time to time, instances have arisen where developers have run over time with construction (for whatever reason) and the Sunset Clause has been activated. They have then cancelled the contracts and refunded deposits, only to then try and resell the properties at a higher price.

One of the risks involved is if a developer does default on the Sunset Clause, while you will get your deposit back the market may have moved on in the meantime and property values may have risen above your means.

** Developer defaulting on the Sunset Clause is a rare occurrence. **

6.Buying & Conveyancing Process

Conveyancing is the process of transferring ownership of a legal title of land (property) from one person or entity to another.

Steps to purchase:

  1. If you decide to make a purchase, you will be required to sign a binding Contract of Sale, with a three business day cooling off period.
  2. At that time you will need to pay a $2,000 AUD holding amount to secure the property in the way of a bank cheque or bank transfer; which is refundable if you do not wish to proceed with the purchase of the relevant property within the 7 days of receipt of the applicable Contract of Sale.
  3. This amount will then form part of the deposit under the Contract. To make a reservation of the property unit, you need to complete this Property Reservation Form; before submitting the deposit payment.

    4. After the holding fee is made; you can:

    1. Use the 3 cooling off period to go through all details of the contract of sale before making a final decision in signing the binding contract.
    2. Appoint a conveyancer to provide advice and information about the sale of property, prepare the documentation and conduct the settlement process.

  4. How to pay your 10% deposit?
    On the day of signing the contract of sale you are required to provide a 10% deposit (unless otherwise approved) into the “Windsor International Pty Ltd” Trust Account. Payment of the deposit is to be made in Australian Dollars ($AUD) in the following manner:

    Electronic Funds Transfer (EFT): Deposit paid by EFT are to be transferred directly into “Windsor International Pty Ltd” Trust Account. A copy of the transfer receipt must be emailed to sales@windsorintl.com.au.

    Account Name: Windsor International Pty Ltd
    Bank: Commonwealth Bank of Australia
    Address: 385 Bourke Street Melbourne
    BSB: 063-010
    Account Number: 1321-9510
    Swift Code: CTBAAU2S
    Reference:
    Eg: Wong Lot22 Medina

    Once the payment is wired into Windsor’s trust account; our office manager will issue a remittance receipt to confirm the received of the 10% deposit. Then, we will forward the 10% deposit to the vendor accordingly together with the binding contracts.

  5. Contract Execution
    Once you have signed the contract of sale and paid a 10% deposit, the contract will be forwarded to the Vendor for execution. The fully executed contract will then be sent to your appointed solicitor/conveyancer as noted in the contract. If you have not appointed a solicitor/conveyancer, the contract will be sent directly to your residential address as noted in the contract. The standard waiting time for this to process is about 30 business days.

  6. 90% of Balance Settlement
    Unless settlement of the balance are by cash; it is advisable to always start gathering all documentation for loan application 4-5 months before completion of the property.

  7. Pre- Settlement Property Inspection
    Buyers are entitled to inspect at any reasonable time during the week before settlement. You can contact the agent to arrange this inspection.

    The contract of sale requires the vendor/seller to hand over the property in the same condition as when it was sold. If, during the final pre-settlement inspection, you find that something is damaged or not working as it was on the day the property was sold/ agreed as per contract, you can request a repair.

    Make a list of the things you need to check from the notes you made about the property during your pre-purchase inspections. Check all items listed in the contract are there and in the right condition.

  8. At the time of property settlement
    The seller/vendor sets the date of settlement in the contract of sale. The settlement period usually 30 to 90days.

    Settlement is the date when the buyer:

    • Pays the balance of the purchase price to the seller/vendor
    • Received the property title and become the registered owner
    • Take possession of the property, unless otherwise arranged.

    There is an official process usually conducted between legal and financial representatives of the buyer and seller.

    At settlement, all outgoings such as rates and other charges are adjusted between the seller and the buyer. The seller is responsible for rates up to and including the day of settlement. The buyer is responsible from the day after settlement.

7.Foreign purchaser often think that the Australia’s stamp duty is high.

Well, the answer is No. You will be surprised to find that Australia is relatively one of the lowest market to get in for property investment – eg: Melbourne, Brisbane, Adelaiade & Perth

Let's take a look at below example with a median housing price of $700,000 in AUD. The stamp duty tax that you need to pay in the below cities vary:
Disclaimer: (**Please note that the below calculation and % are based on indicative figures only**)

Australia

Foreign citizens who want to buy or invest in residential property in Victoria (VIC), New South Wales (NSW) and Queensland (QLD) will need to pay a surcharge on top of their stamp duty (land transfer duty) and, in some states, land tax. (Applies to selected states; and foreign purchases and only in certain circumstances)

(Melbourne, VIC)

If you buy an apartment for AUD $700,000:
With AUD $700,000 you can get 1bed 1 bath apartment with carpark/ 2bed2bath apartment in the CBD.

Full Stamp Duty (5%)
Foreigner stamp duty (7%)

Aud$700,000*12% = AUD $84,000

(Sydney, NSW)

If you buy an apartment for AUD $700,000:
With AUD $700,000 you can probably still get a 1bed1bath in the CBD / 2bed1bath apartment in the CBD fringe.

Full Stamp Duty (5%)
Foreigner Stamp Duty (8%)

AUD $700,000*13% = AUD $91,000

United Kingdom (London)

Assuming AUD 700,000 = GBP 400,000
With GBP 400,000 you would most likely be able to get a 1bed studio apartment, outside of Zone 1,2 &3 city area.

London Stamp Duty and Land Tax (SDLT) are calculated based on scale measure.

Buy-to-let and second home Stamp Duty tax bands
Brackets Buy-to-let/second home rate (April 2016)
Up to £125,000 3%
£125,001 - £250,000 5%
£250,001 - £925,000 8%
£925,001 - £1.5m 13%
over £1.5m 15%
Source: HMRC

If you buy a studio apartment for £400,000, the SDLT you owe is calculated as follows:
3% on the first £125,000 = £3,750
5% on the next £125,000 = £6,250
8% on the next £250,000 = £12,000

Total Tax: £3,750+ £6,250 +£12,000 = £22,000

**You should also note that the property management service fees from the agent are relatively higher, about 17%-20% from the monthly rental value.**

United States (New York)

Assuming AUD $700,000 = USD $520,000
You should also note that 1Bed 1 Bath apartment in NYC is ranging from USD $800k – USD $1.2m

In US, stamp duty is called Transfer tax.

What is Transfer Tax?

Transfer tax is a tax imposed by states, counties, and cities on the transfer of the title of real property from one person (or entity) to another within the jurisdiction. It is based on the property’s sale price and is paid by the buyer, seller, or both parties upon transfer of real property.

Transfer tax varies depending on the location/states of the property.
(http://manhattanmiami.com/resources/tax-legal-issues-foreigners-buying-real-estate/)

If you buy an apartment at US$ 520,000, the transfer tax as follow:

Price, US$ TAX RATE Calculate Total
US$500,000 or Less 1% (price)* 0.01 = total
US$500,000 or More 1.425% (price)* 0.01425 = total

Identify tax rate: US$500,000 or more -> 1.425%
US$500,000 * 0.01425 = US$9,975

Total Transfer Tax = US$ 7, 410

**Generally, the US transfer tax (stamp duty) is significantly less than what you have to pay in Australia. However, you should note that foreign owners are subjected to a 10% withholding tax on the sales of U.S. assets unless previously agreed with the IRS (ATO equivalent). And the management fee

Also, please note that the residential Property Management Fees charges between 8-12% of the monthly rental value.**

Canada (Toronto)

If you buy a house at a selling price of CAD 700,000; the stamp duty tax as follow:

15% Non-Resident Speculation Tax a.k.a Stamp Duty

Stamp Duty to pay: CAD 700,000* 0.15= CAD 105,000

Japan (Tokyo)

Stamp Duty applied based on a reducing measures:
Assuming US$700,000 = JPY 80,000,000
**You should note that the current running price in the CBD Tokyo market is about ¥200,000,000 - ¥350,000,000 (About AUD$ 2.2m - AUD$ 3.8m)

If you buy an apartment at JPY 80,000,000; the stamp duty tax as follow:

Stamp Duty Land Tax
Prices on Contract Real Estate Sales Contract
Less than ¥1M ¥500
Less than ¥5M ¥1,000
Less than ¥10M ¥5,000
Less than ¥50M ¥10,000
Less than ¥100M ¥30,000
Less than ¥500M ¥60,000
Less than ¥1B ¥160,000

Stamp duty to pay is: ¥30,000

Singapore

If you buy an apartment at SGD 700,000;

Profile of Buyer BSD Rate ABSD Rates from 12 Jan 2013
Foreigners (FR) and entities buying any residential property 1% on first $180,000
2% on next $180,000
3% for the remainder		 15%

The stamp duty tax as follow:

SGD$180,000*1% = SGD$1,800
SGD$180,000*2% = SGD$3,600
remaining SGD$340,000 = SGD$10,200

Additional Buyer's Stamp Duty (ABSD) - 15%
SGD$700,000*0.15 = SGD$105,000

Total Stamp Duty to pay SGD$15,600 + SGD$105,000 = SGD$120,600

**You should also note that the current running price for 1B1B in the CBD Singapore market is about SGD 1,500,000 - SGD 5,000,000.**

Hong Kong

Assuming AUD$700,000 = HKD$ 4,200,000
If you buy an apartment at HKD$ 4,200,000; the stamp duty tax as follow:

Profile of Buyer AD Valorem BSD (Old) For first time buyer (HKD) Foreigner BSD
HK citizen/HK PR, or a foreigner Less than $2,000,000: 1.5%
$2,000,000 - $2,176,470: $30,000 + 20% of excess over $2,000,000
$2,176,470 - $3,000,000: 3%
$3,000,000 - $3,290,330: $90,000 + 20% of excess over $3,000,000
$3,290,330 - $4,000,000: 4.5%
$4,000,000 - $4,428,580: $180,000 + 20% of excess over $4,000,000
$4,428,580 - $6,000,000: 6%
$6,000,000 - $6,720,000: $360,000 + 20% of excess over $6,000,000
$6,720,000 - $20,000,000: 7.5%
$20,000,000 - $21,739,130: $1,500,000 + 20% of excess over $20,000,000
$21,739,130 & above: 8.5%		 15%

Below Tax Calculated using BSD Calculator (https://en.midland.com.hk/calculator/mortgage-calculator.jsp):

AVD (old) for first time buyer: $630,000 BSD (Foreigner): $630,000

Total Stamp Duty: HKD$1,260,000 (about AUD$210,000)