Buying OS: A Growing Market
While some millennials are chasing FOMO with OS holidays for the ’gram, many other clever millennials are looking OS for property investment. In fact, the number of Aussies turning to the international property market is growing, especially for young people.
A recent Atlas Wealth Management Expat Insights Report revealed younger demographics (28-38 year olds and 18-28 year olds) had the biggest increase in investment overseas, respectively up from six per cent to 10 percent and two percent to four percent. Overall, there’s been a 29 percent increase of Australians purchasing properties abroad. And it’s no surprise – while you can’t wind back the clock on the Aussie property boom, you can be clever and chase the next property boom in international markets.
According to the same survey, the most attractive market for Aussies in the US at 48%, followed by Asia at 18%, the UK at 17% and the UAE at 10% with the main appeal being low entry prices, high-income yields, more diversity and choice of property.
Let’s look at it this way, the median house price in Sydney is around $AU900K, while it’s roughly $AU250K in the US (of course, not in places like NYC etc). In the US there are also tax incentives to purchase the property that you live in, so if you’re lucky in the Green Card lotto, you may just want to move to the land of opportunity and save a little more.
Now let’s look at the US and other popular locations in a little more detail.
Following the mortgage crisis of 2008, the USA has become a popular investment destination for Australian property buyers. With cheap houses available in cities right across the country, many investors have snapped up bargains.
In the US, there are no major laws prohibiting Australian from buying or owning property in the US, so you can freely enjoy a slice of the American property pie, you’ll just need to file a tax return at home and in the US.
Your chosen property will also be subject to a number of requirements specified by the Foreign Investment in Real Property Tax Act. As an Aussie resident, you’ll be taxed on a few things – your offshore bank accounts, capital gains on OS assets and any rental income. For this, you’ll need to set up an Individual Taxpayer Number (ITN), which can be issued by the IRS or an IRS approved accountant.
If you’ve got a poor credit score though, it could be curtains. You’ll need a stellar score before applying for a US mortgage, which isn’t hard to do. You’ll start by applying for a US bank account and credit card. Once you’ve found your home and done all the paperwork, your property will go into escrow – a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction. Once the property closes escrow, you’ll sign the final paperwork and get the keys!
Thinking of buying a little further north? Well, you’re in luck, because Canada just happens to be one of the easiest (and nicest) countries to consider when purchasing an overseas property. As Canada’s rules for foreign purchasers have nothing to do with citizenship, overseas buyers and investors essentially have the same rights as Canadian citizens. There is however a non-resident speculation tax of 15% of the purchase price of your new abode, however, this is only applicable in a number of Canadian cities – not all.
What’s more, most Canadian lenders will finance non-residents, although you’ll find they typically ask for a larger deposit. Foreign buyers also pay the same land transfer taxes as Canadian residents. The only point you really need to consider (beyond where in Canada you actually want to buy) is insurance. It can be difficult and costly for non-residents to get insurance for an investment property in Canada. Buyers are required to have insurance before they get their mortgage, so make sure you investigate this prior to making your offer.
Sure, the language barrier might be a bit of an issue, but for the most part, foreign ownership in France is fairly straight forward. Foreign buyers can buy and sell their properties in France without any major restrictions. To help with the red tape and language issues, your best bet is to hire a property agent who can offer you a range of services, including preparing contracts and working with a notary to organise the legalities of your deal.
Once you’ve found your dream home, you can then make your offer, sign your contract (compromise de vente) and pay a 10% deposit to ensure the sale is secure. You’ll need to have the full mortgage funding in place, as well as cash left over to pay for stamp duty and notary fees. Don’t forget – for anyone making an international payment it’s worth checking how much your bank is actually charging you for this and whether there’s a mark-up on the exchange rate.
Known as the easiest place to buy property in Asia, Malaysia allows you to purchase a house (not just an apartment or condominium) in your own name without a corporate structure attached to the deal. However, there are a few rules you’ll need to follow. Some Malaysian states will restrict where you can own land. Heritage properties also are restricted to local buyers only. It’s also worth noting that each Malaysian state has a minimum purchase price on properties for foreign buyers. This can range anywhere between $200,000 to $600,000 AUD.
The list where you can buy is endless, you’ll just need to do your research and keep a close eye on the country’s economy. For example, the fall in the UK economy and property prices after the Brexit vote attracted many Australian buyers to the mother country. While these factors can attract investment, changes in the exchange rate or local tax legislation can have the opposite effect. Get all the facts and be in the know, then…let’s go house shopping!