Posted 22 Jul 21

How to Purchase International Property

With Australian property prices at an all-time high, buying property overseas has become increasingly popular. 
With the price of property skyrocketing across Australia, more and more people are looking abroad to purchase property in comparatively more affordable markets that provide better value for money. Whether buying for cultural or family connection, building your investment portfolio or purchasing a holiday property that someday you hope to retire to, buying property overseas has become increasingly attractive. 
Before taking the plunge, purchasing international property isn’t as straightforward as it is if you were to buy here in Australia. There are financial and tax implications, rules, and responsibilities of being a homeowner or landlord that may differ from Australia. Here, we look at some of the things to consider and how to purchase an international property.

Not all property markets are created equal.

When purchasing international property, it pays to do your research. Deep dive into the property market of the different countries you would like to purchase in. But be careful not to be too broad in your research. Instead, narrow down to states, regions, and cities to get a really good understanding of the different markets. Developing countries have the potential to offer lower property prices and higher growth rates. In contrast, large economies, such as the United States, have a more complex real estate market that is still comparatively affordable in some key cities and states, but in others is just as expensive as Australian property prices. 

Funding your international property purchase

According to the Home Loan Experts, Australian lenders can’t fund your property purchase outright, meaning Australian banks can’t take a foreign property as security for a home loan. However, suppose you don’t have enough of your own savings. In that case, they can help fund your investment plans if you have an existing Australian-based property with enough equity – talk with your bank or lender to find out more about using your existing property as equity.
Next, you would need to speak to an Australian bank with international branches or non-Australian owned international banks, but the trick is to get in touch with the local branch of the country you wish to purchase in. Learn from them the interest rates, mortgage terms, fees, legal costs and lending amount (some countries limit your borrowing capacity).

Don’t get caught out with the exchange rate and transferring money.

Depending on which currency you’re purchasing in, the exchange rate can either work for or against you. Keep an eye on the exchange rate as a few cents can make a huge difference. Also, shop around for the best exchange rate and money conversion fees, plus you could also be hit with sending and receiving fees. 
You will also need to take into consideration transfer limits and time. Some international money transfer providers have minimum and maximum limits on how much you can transfer. Make sure you’re aware of this from the get-go so that you’re not caught out. Also, the speed it takes to transfer the money. It can range from one to five days, but knowing this will ensure you factor in the time so that you don’t miss out on your dream property waiting for the funds to clear. 

What are the tax implications of purchasing international property?

The tax implications of purchasing international property are complex and should be done with the advice of your accountant and financial planner. According to Home Loan Experts, you don’t need to inform the Australian Taxation Office (ATO) that you’re buying property, but you need to disclose that you did on your next tax return. This will cover things like rental income, expenses and capital gains tax and or losses. 
You will also need to consider the Double Tax Agreement (DTA) that Australia has in place with several different nations. Meaning, Australia and the country you purchased the property in have taxing rights over rental income. 

The hidden costs in owning international property.

Once you own the property, you need to factor in; local property taxes, insurance, mortgage repayments, strata fees, management costs, ongoing repairs, and council rates. Plus, one financial implication that often goes overlooked is the fluctuations in the exchange rate, which could impact the rental income you receive.
For more advice on how to purchase international property, speak with your local Belle Property agent.
By Belle Property
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