Useful info for those looking to invest in Australian properties

By The Folks @PropTalk - January 10, 2015 No Comments

The wife and I came across an article in BT advising potential buyers on some of the pitfalls when buying Australian properties.

Following may be especially useful to first-time investors into Australia:

1. Only brand new properties
All property purchases by non-Australians must be approved by the Foreign Investment Review Board (FIRB), which monitors the flow of foreign investment into Australia. And the only properties available for foreigners to purchase with FIRB approval are those which are brand new. However, these can sometimes be up to 40% above similar properties in the same region because of limited supply of brand new properties. The inflated price could lead to other challenges, such as the property taking a longer time to be resold.

2. Limited lending
Banks will usually lend up to 80% of the purchase price of a property but with above market prices being charged for offshore sales of brand new Australian properties, it is not uncommon for bank valuations to come in significantly lower - sometimes at 40% below contract price - which means the buyer has to fund the difference (caused by the high price).

3. Inability to on-sell to the global market
Once the property has been sold new to a foreigner it can only be sold again to a local. Often high-rise apartments sold off the plan overseas simply do not appeal to the local market.

4. Unethical sales tactics
Developers have been known to run property "education seminars" under the guise of giving free property market information but with a hidden agenda of directing buyers to a particular development. Fair Trading Offices across Australia are currently targeting such selling tactics as they are not unbiased and can be misleading and deceptive.

5. Conflict of interest
In circumstances where the developer has arranged financiers, agents, solicitors and one stop shopping to sell the development - those who the buyer may think have his best interests at heart have close ties with the vendor and are financially rewarded if and when the sale proceeds.

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