Overseas invester wanting to invest in Australian older Real Estate

[ticktack]

Hi there,
I have been in Australia for nearly 3 months now but I am a UK resident. I have been reading a reasonable amount about the Australian real estate system here and want to invest but have found one crucial problem. I have heard that I might only have the option of buying new properties and vacant land in order to bulid upon and not buy older properties because I am not an Australian resident. I am only interested in older housing and not new real estate. Is this true? or are there conditions regarding buying older properties which might allow me to buy the type of properties that I want? I would appreciate any help in this matter.

Thanks
Graham

 

[Les]

G'day Graham,

There are exceptions to the "buy only new" ruling - (thinks...) if you are residing in the country, I "think" you can buy second-hand, but would have to sell upon leaving. I think you are allowed to buy to live in while here.

Vague recollections of some other possibilities - but check out for yourself - www.firb.gov.au (Foreign Investment Review Board) - to get all of the good oil.

Regards,

 

[geoffw]

Hey Graham,

What you need to a joint venture (JV). I'll provide the Oz citizenship and the opportunity to buy existing property, and you provide the finance (hehehe).

Seriously though, there are peole providing jv's- especially wrappers. I don't know if that would interest you though.

 

[ticktack]

Thanks guys

Its a bugger. Yeah I thought so! I'm going to get a sponsership Visa in October for 4 years and this will hopefully help for the short term. You never know the rulings might change over this time period.

Thanks for your help.
Graham

 

[Tony]

Hi,
Have you thought of a lease option? You may be able to control the property for reasonable amount. But i would imagine that you would at some need to either purchase the property or sell it.

Regards Tony.

 

[KJL]

Overseas investor

Graham

I am (was) a pom myself (the cricket made me change nationality....).

Something else to look out for is mortgage insurance. When you have got FIRB approval to buy somewhere, you are likely to need a 20% deposit. This may or may not be an issue depending on (amongst other things) where you are - if you're in Sydney then it can be a large concern!

The 20% deposit necessity isn't directly because of any requirements of the lending institutions (who were, in our case, happy to go to 95%).

Rather, once you go over 80%, in most cases the banks require Lender's Mortgage Insurance. And it's the providers of LMI (and I think there are only a handful) who won't insure you if you do not have residency - they perceive you as a 'flight risk'. Which is frustrating, but fair enough, I suppose, if you look at it from their point of view.

As for the mechanics of buying without residency, as already noted, FIRB is the place to go for info.

Note, however, that if you're buying a new apartment or OTP, many developers already have FIRB approval, which makes things a lot easier. I recall the limits are that only 50% of any new/OTP development can go to non-residents, so just because a property is new doesn't necessarily mean you can have it - the developer may have reached the 50% limit, or may not even have sought FIRB approval.

For property which isn't new, I think you need to apply directly to FIRB (which I've previously done and got permission, but it's a bit of a hassle). Also, the usual condition is that you must sell within a reasonable time when (or if) you leave the country - of course, the risk is that when you do leave, that mightn't be the best time to sell, and you become a "desperate vendor - owner moving overseas".

On the other hand, if you subsequently get residency, I believe the condition falls away and you can do what you wish.

I understand the policy behind the rules is to ensure that ownership of excessive amoutns of Aussie real estate doesn't fall into overseas hands, but that building isn't unnecesarily stifled (hence the easier permission for new residences). Once someone's lived in a residence, it isn't new any more, even if it's only 2 months old, and the usual 'non new' FIRB rules apply. So I wouldn't hold your breath for any rule changes in the short term.

All this happened a couple of years ago, so don't take my word for anything, and be sure to check with FIRB that everything's not changed. Hope this helps!