An Aussie guide to buying property overseas
Dominic Beattie
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- Buying property overseas is possible for Australians, but the rules, risks and costs vary widely by country and can change quickly.
- Financing is often the biggest hurdle, with many buyers needing cash or overseas loans rather than standard Australian home loans.
- Doing thorough research is essential, particularly around local laws, taxes, political and economic stability, and your ability to sell or move money later on.
Ever dreamt of owning a chateau in France, a ski lodge in Japan, or an apartment in the bustling streets of New York? It might be possible, but it will likely come with risk and challenges, as foreign investment rules, property taxation, and lending options vary greatly around the world.
Can Australians buy overseas property?
Australians are generally allowed to buy property overseas, but the rules, costs, and risks vary widely depending on the country you’re buying in. Some nations welcome foreign buyers, while others restrict property ownership to certain areas, property types, or require additional approvals. Financing can also be more complicated. Australian lenders typically won’t offer standard home loans for overseas property.
In many cases, Australians buying overseas won’t have access to the same protections they’re used to at home. Legal systems, property rights, contract processes and buyer safeguards can differ significantly, which makes local legal advice essential.
All that said, buying a property overseas can be a worthwhile opportunity, especially for buyers approaching their foreign purchase with a solid understanding of how the process works and the potential implications.
Savings.com.au’s two cents
Unless you’re a cash buyer, purchasing a property overseas can be tough, but not impossible. No two countries are the same - they each have various laws and regulations that must be followed for foreign investment. If you’re eager to take the plunge, you’ll need to take some time to conduct research and speak to professionals specialising in overseas property purchases.
How to finance an overseas property
If you’re looking at purchasing a property overseas, you may be wondering how to finance your venture. Below are the three ways you can finance an overseas property. But be mindful that some countries may not offer all the choices to foreigners:
Apply for a mortgage from an overseas lender
Although possible in some countries, obtaining a home loan from a lender local to the country you’re buying can be difficult. If you do manage to get one, the interest rates could be higher than if you were a local and your payments are likely to be in a foreign currency.Apply for a mortgage from an Australian bank
Some banks and building societies - particularly those born overseas, like HSBC - offer international banking services to eligible customers. Check with your own bank, or others operating in Australia, to see if they support the country you’re looking to buy in.Pay in cash and buy the property outright
With cash in hand, you won’t have to deal with the challenges of borrowing money. If you have the available funds or Australian assets you can borrow against at home, you could buy a home outright, save on interest, and speed up the entire purchasing process.
Top things you need to consider when buying overseas
Before you go out and decide to buy a property on the other side of the world, there are many details to research and consider. So, to make life just that little bit easier for you, we spoke to Ray White chief economist Nerida Conisbee to find out the six things Australians need to understand before purchasing offshore.
1. Location
“The first thing people need to consider is if you can actually buy in the country you’re looking at,” Ms Conisbee told Savings.com.au.
“There can be very complicated restrictions depending on where you look. For example, some countries ban people from buying, such as Canada and Iceland, while the likes of the UK and US have very relaxed rules on foreign purchases.”
Ms Conisbee recommends conducting online research to get an idea of where it’s possible to buy.
2. Finance options
Accessing finance is key in any property purchase.
“Australian banks are hesitant to lend to people who are wanting to buy property overseas as there are higher risk elements,” she said.
“As a result, you may need to look at getting finance from the country you’re buying in. The challenge with that is someone looking to get finance in a foreign country is often charged a higher interest rate, or can also be restricted in terms of the amount they’re able to borrow.”
Because foreign mortgage requirements differ from country to country, it’s best to receive professional advice from mortgage brokers, real estate agents, and/or lawyers to uncover your finance options.
3. Taxation
Before you buy an overseas property, you need to consider the tax implications.
While Australia has tax treaties with many countries to prevent double taxation, as an overseas investor you will still need to declare all your income, including rental income and/or capital gains from the property to the ATO. You may also be required to pay tax on your rental income in the country where you own the property.
“Taxes on foreign buyers can be quite significant and can make the purchase far less worthwhile than it otherwise would be,” she said.
Consult a professional tax advisor to determine your situation or head to the ATO website to find out more.
4. Stability
Understanding how stable the country is economically and politically - and how stable its relationship is with Australia - is another big thing to consider before purchasing an overseas property. You don’t want to end up unable to sell when you need to, or struggling to move funds (or yourself) in and out of the country.
5. Get a feel for the place
Before making any final decisions, Ms Conisbee recommends visiting the property to get a feel for the place.
“Buying property overseas unseen can be a risky strategy,” she said.
“You may be buying somewhere that isn’t desirable, or may be subject to major infrastructure in the near future. You need to make sure that where you’re planning to buy is exactly what you’re after.”
6. Rental options
If you’re investing, you need to find out whether there are any restrictions for renting the property out.
“A lot of countries do have rental caps on foreign investment properties. For example, although the property could potentially get $500 a week in rent, you may be restricted to only charging $200 a week due to the rental caps,” she said.
“Another thing you may need to do is find someone to manage the property. You want to conduct a lot of research for this because you’ll be placing a high element of trust into this person.”
See Also: Moving overseas finance checklist
Which countries are the easiest to buy a property in?
Now you’re equipped with plenty of general information about purchasing a property overseas, the fun part can begin - finding the right country for you. To help, we’ve compiled a list of countries that have relatively easy processes for Australians buying a property across the pond, ergo relaxed laws, limited restrictions on foreign investment, and fewer language barriers.
But before you go through the list, it’s important to note that buying overseas property with a home loan can be difficult and complicated, even in 'easier' countries.
New Zealand
Australia’s next door neighbour New Zealand can be a great place for people to buy a property or holiday home. Besides the fact that their mortgage system is fairly similar to that of Australia’s, New Zealand’s taxation laws include no comprehensive capital gains tax, land tax, or stamp duty. Score! Aussies are also largely exempt from the Overseas Investment Amendment Act due to the existing free trade agreements.
If you’re buying in NZ, check if your Australian bank or lender has a presence in the country. This may help down the line when you apply for a mortgage, as most lenders in NZ require borrowers to have some local credit history.
Plus, you can’t forget that New Zealand is a short flight away if you ever need to pop home, wind down and relax in an overseas holiday home, or visit a Kiwi investment property.
UK
There are no legal restrictions on foreigners buying property in the UK, even if you aren’t a resident. You don’t even need a visa (cue the hoorahs!). But while buying a property in the UK is easier than other European countries, there are still some things to be mindful of.
Obtaining a mortgage in the UK for a non-resident can be very difficult, though some are willing to offer mortgage options to foreigners able and willing to put down larger deposits and/or pay higher interest rates.
For Scott Aggett, an Australian property investor, buying a property in the UK through a local bank was pretty simple.
“I left Australia when I was 21 and went to the UK, spending five years over there working in real estate,” Mr Aggett told Savings.com.au.
“While I was there, I bought two properties in London which were funded with a local bank. As I was on a working holiday visa, this enabled me to open a bank account and eventually qualify for a loan.
"Buying in the UK with a mortgage was pretty straightforward and was a very similar process to Australia in terms of the consumer's perspective, the financial checks, the approval process, and the timeframes. However, the exchange and settlement processes were very different to Australia which was a big learning curve.”
It’s recommended to use a mortgage broker or specialist lender to help you secure a mortgage in the UK. The tax implications for non-residents include stamp duty land tax, income tax, and capital gains tax.
“The biggest tip I can give to Australians wanting to buy overseas is to understand the fundamentals of the market,” Mr Aggett said.
“Find out what the supply and demand is like and what prices are actually achieving. If you really understand that and also physically inspect the properties yourself then you’re going to lower the risk of the whole project.”
US
Thinking about pursuing the American dream? Buying a property in the US as a foreigner can be relatively easy, as long as you’re aware of the processes involved and the tax implications.
Foreigners are free to buy properties and own land in the US. Australian citizens will need to apply for an Individual Taxpayer Identification Number (ITIN), which is a tax processing number assigned to foreigners, to proceed with their purchase. They will also be required to complete and file a tax return annually in Australia and the US. Typically, US property held by a foreign investor will be subject to additional requirements as stipulated by the Foreign Investment in Real Property Tax Act.
Although you can receive a loan from some US banks, the process can be much easier for a cash-only buyer. US banks impose stricter lending criteria for foreigners. Most require a larger deposit - usually about 30% of the home price.
US banks will also examine your credit score. The US credit scoring system is markedly different to that of Australia, so a potential US buyer might consider opening a local bank account and credit card and starting to build and pay off balances.
France
Australians are able to buy French property with limited restrictions. Because foreign property purchases are quite popular in France, there are a few banks who will provide non-EU nationals with a mortgage, although there may be some limitations. For example, some lenders may allow you to borrow between 70% and 80% of a property’s value while others will reject foreigners buying with loan-to-value ratios (LVRs) above 50%.
You will be required to use a notaire to buy or sell property in France, and will also be entitled to pay notary fees along with estate agent fees and mortgage fees. As always, it’s best to hire an English-speaking advisor (who specialises in foreign purchases) to guide you through the entire journey.
Japan
If you’re a cash buyer, Japan can be relatively easy to buy in, as long as you follow a couple of simple rules. Along with his properties in the UK (which he has now sold), Mr Aggett has three investment properties in Japan.
“At the end of 2015, I bought a five storey ski lodge with two friends from Sydney all in cash as Australian citizens,” Mr Aggett said.
“Although physically flew over to inspect the properties myself, I did have the help of a local Japanese estate agent who handled the transactions, and also had local trades people on the ground conduct building and pest reports before transacting the purchases.
“As we didn’t require the help of a bank, all we needed to do was set up international transfers to get the money across to the estate agent's trust account and the conveyancer which was a relatively easy process.”
However, if you'll need to take out a loan to buy a property in Japan, you might not want to get your hopes up.
“It’s almost impossible to buy a property through a local bank, unless you’re seen to be in the community. It’s all very relationship-driven based on trust, longevity, and respect,” Mr Aggett explained.
“Although I have bank accounts and a business set up in Japan, I have yet to be approved for a mortgage. Because the difficulty to get a loan is high, most international buyers opt to purchase investment properties in cash.”
For Mr Aggett, buying in Japan was beneficial in the long run.
“While there is definitely an element of risk, the opportunity to invest was huge,” he said. "If you can fund your purchase in cash, you can build rental portfolios with 15% to 20% returns which is a big deal.”
Which countries are difficult to buy a property in?
On the other side of the coin, some countries make buying a property as a foreigner much harder, if not impossible. If you've considered purchasing a property in one of the countries below, make sure to conduct extra research and receive professional guidance.
“In some countries, there’s not always a lot of transparency in the sales process. It’s important to make sure you do your own due-diligence in terms of what restrictions there are on buying property as you don’t want to get caught out down the line,” Ms Conisbee said.
Canada
If your dream was to buy a property in the picturesque slopes of Canada, this dream will have to be popped on the backburner. Canada has put a temporary ban on foreigners buying homes until 2027, with a few exceptions for those purchasing certain investment properties or homes to live in during the term of particular visas.
Thailand
Foreigners are not permitted to purchase land in Thailand and local banks do not provide loans to foreigners.
However, that's not to say you can’t own a property in the country. As a non-citizen, you may be able to buy apartments or condominiums. Under Thai law, up to 49% of the unit area of any condominium may be owned by foreigners.
Foreigners wanting to buy land or a house in Thailand may also set up their own private limited company. The company must be a legitimate business and must have Thai and foreign ownership. A foreigner may not own more than 49% of the shares.
If you’re planning on purchasing a property in Thailand, you need to have the cash to do so, and must also hire a reputable and independent real estate lawyer. The realty industry in the country is unregulated, so a lawyer will be needed to help you navigate paperwork, legal requirements, and due diligence checks.
Bali
Although it’s not impossible to buy in Bali, it can be a difficult process. Like Thailand, Indonesia prohibits foreigners from owning land.
While foreigners can buy condominiums, buying a freehold property can be risky. To do so, you'd likely need to employ a nominee (local representative) to own the property for you. While this method is widely used, it can be fraught with risk.
It’s also important to note that you’re unlikely to get a mortgage in Indonesia as a foreigner. When buying in Bali as a foreigner, make sure to get professional advice and also find a local you can trust.
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