How to invest in Australian property as a non-resident

Registration and fees

Before you can get a home loan and buy an investment property in Australia, you’ll need to request approval from the Foreign Investment Review Board (FIRB) and register your investment via the ATO.

This will likely involve paying an application fee, the cost of which will depend on the value of the property you’re buying. You’ll typically find out within 30 days if your application has been approved or denied.  

Tax

You must declare the income you earn from your Australian property investment on your Australian tax return. You may be able to claim certain investment-related expenses as deductions which could affect the tax you pay.

Also, if your investment property’s value increases, you may need to pay Capital Gains Tax (CGT) when you sell.

Contact the ATO for details of the latest updates to Australia’s tax rules.

Property type

Foreign investors can purchase the following types of residential property in Australia:

• Vacant land for residential development
• New or near-new dwellings
• Established dwellings (provided you are a temporary resident planning to use the dwelling as your place of residence while in Australia, or if you are planning to redevelop the dwelling)

Vacancy fee

If a foreign investor buys a residential property in Australia, and this property is left vacant and untenanted for 6 months or more, the investor may need to pay a vacancy fee. The fee payable will generally be equivalent to the residential land application fee that was paid by the foreign person at the time the application for foreign investment approval to purchase the property was made.

When it comes to non-resident home loans in Australia, different lending rules apply depending on the lender you apply with. 

Generally, lenders tend to take one of the following three views on non-resident applicants:

1. They decline these applications outright as they perceive foreign borrowers as high-risk applicants. They may also decline because their internal systems cannot process home loan applications received from borrowers who live outside the country.
2. They place certain lending restrictions on the loan amount, or ask for additional documentation for Australian expat applicants, temporary Australian residents, or foreign nationals.
3. A few lenders actively assess home loan applications from non-resident borrowers and offer flexible terms to temporary residents who want to buy a property in Australia.

It’s vital that you understand the property market where you plan to invest, because every location’s demographics, culture, and other unique features will affect your investment property’s price and availability.

Some other considerations you need to think about before applying include:

• Some lenders may charge a higher interest rate for non-resident loans.
• If your income is in a foreign currency, you must check if the lenders will accept this currency for home loan repayments. Some currencies that are commonly accepted include USD, HKD, NZD, EURO, GBP, CAD, JPY, SGD, and CHF.
• Some lenders may apply restrictions if your income is in the currencies of certain countries, such as Saudi Arabia, South Korea, India, Taiwan, Thailand, UAE, etc.

You will also likely need at least a 10% deposit, along with an adequate amount of savings or other funds to cover upfront costs, such as mortgage set up fees, Lenders Mortgage Insurance (LMI), stamp duty, and legal fees. 

If you already own another property in Australia, you may be able to put any equity you’ve built up in it towards a deposit for the new home. Lenders may also be able to offer you a loan where no deposit is needed if your parents own a property in Australia and are willing to act as guarantors for your loan.

Your borrowing power, or how much you’re able to borrow, depends on the lender, your financial situation and your citizenship or visa status. The higher your income and the lower your expenses, the more money a bank may be willing to lend you.   

Generally, most property buyers in Australia can borrow up to 80% of the property’s value as a home loan. In some instances, you may be able to borrow up to 95% of the property value, though the smaller your deposit, the more you may need to pay for LMI. 

Non-resident borrowers in Australia may be subject to stricter home loan eligibility criteria. For example, home loans for foreign investors may have a lower loan to value ratio (LVR) of 60%, meaning you may be asked to pay a 40% deposit on the property upfront, and only be able to borrow up to 60% of the property’s price.

Some lenders offer the same features to non-residents as they do to Australian borrowers. These may include:

• A minimum loan amount of $100,000, with a maximum amount based on your personal circumstances.
• A maximum loan to value ratio (LVR) that depends on your situation.
• A maximum loan term of 30 years.
• Multiple loan types, including fixed or variable interest rates, construction loans, professional packages etc.
• A maximum fixed interest period of up to 15 years.
• A 100% offset account.
• Redraw facilities.

When comparing home loans with different features, the best choice for you will depend on your financial situation, investment goals and more.

Borrowing for non-residents is slightly complicated. To help guide you through the process, you can work with an experienced broker. Their understanding of the home loan application process and assessment of your situation can help them procure the best deal for you.