Melbourne Property Tips: Overseas property, especially Australian property, is still going strong in China. When the RMB is facing devaluation and the stock market is uncertain, investors need some solid projects for long-term investment. Overseas property has become an extremely valuable project.
However, when investors make money and want to invest in the overseas property market, they are a bit apprehensive about how to invest, how to manage, and what to expect from this investment, is it possible to be scammed, this series of questions will come to mind. The overseas market is actually more regulated than China's, but as an investor, you still need to have some basic knowledge to make a judgment.
Here we will share some basic property buying knowledge and industry information to help those who are willing to invest in Australia to be more prepared.
What can overseas investors buy in Australia?
The Australian government, in order to protect the interests of local residents, requires that overseas investors can only buy new developments or build properties that have not been used for more than 12 months. Buying an off-plan house is an option, but a built house that meets the regulations can also be bought. Australian houses are fully renovated with some appliances, so there is no need to worry about renovation.
How much money do I need to prepare to buy a house in Australia?
If you buy a period house, the down payment is 10% of the purchase price, which will be placed in a trust account with the developer and monitored by the government. When the house is handed over, you will need to pay the portion of the purchase price in addition to the bank's confirmation that it will lend. If the bank is willing to lend 80%, the buyer will have to make up the 10%, and if the bank will only lend 70%, then they will have to make up the 20%. Also, stamp duty, taxes for overseas buyers are paid at this stage. Once you get the house, you have to start paying for the property, government administration, and utilities.
There are professional mortgage brokers in Australia to help you apply for a bank loan. Because the banks in Australia are competitive and there are many products available, a loan broker can usually help their clients find the best product for them, and they also communicate with clients beforehand to help them plan their finances.
When you are planning to buy a home and you are not very sure about the funds at hand, it is essential to talk to a reliable loan broker beforehand. Their income mainly comes from the bank's commission, so in general, it is not costly to the home buyer.
Who will help me with the procedures of buying a home in Australia?
I remember buying a house in China and being given a standard contract by the sales office and told I couldn't change it, so everyone just signed it with their eyes closed.
When you buy a house in Australia, the real estate agent gives you the information about the property, but there is a lawyer to execute the purchase. When you buy a property and find a lawyer, the lawyer will explain the terms of the contract to the buyer. Of course, the contract is also standard here. The 10% down payment deposit is held in the lawyer's trust account, and the lawyer will be working with the developer to deliver the contract. The same goes for the handover of the house, where the lawyer plays a very important role. Getting the right lawyer who is reliable can save a lot of heartache for the home buyer. The rigorous system of lawyers involved in buying a house is also an important assurance to the buyers. The average lawyer costs less than $2000 AUD.
What is the cost of buying a property in Australia?
As an investment in the property, we would have to look at this investment in two dimensions. The first is capital growth, which is the value-added to the property itself, and the second is RentalYield, which is the Rental returns. Ideally, the house will collect good rents and increase in value itself quickly over a few years.
capital growth is dependent on the overall market conditions, the area, and the type of property.
Not long ago, I saw a news report that mentioned the property appreciation in KEW, an upscale area of Melbourne, over the past few years.
25 years ago the owner paid $640,000 for a house in Kew, a sum that actually seemed like a lot of money at the time. After 25 years, the owner sold the house for AUD$5 million. Spread-out, there was an annual increase in the value of the property of $200,000 AUD. Looking around now, the houses on that street have been mega expensive.
Looking backward is all easy, the hardest part is predicting the future. At the moment the owners bought the house, they probably didn't foresee their house being this price in 25 years either. This house is certainly a big winner from a capital growth perspective.
For the investor, they may feel that the price of the property is already high now, and there is uncertainty about future value appreciation. It's like entering the market after the stock index has risen from 3000 to 4000, not knowing if it will go up or down, when experiencing a 5,000 and then 4,000 again, knowing that there was actually a lot of opportunity between 4,000 and 5,000 The key depends on how you take advantage of it.
From an asset appreciation point of view, a house with land will be more robust than an apartment house, and apartments in scarce locations will have more potential than in dense locations.
One investor paid a fortune for a condo in Docklands 8 years ago and the property has increased in value by $100,000 since then around. If she had taken a penny for a townhouse 8 years ago, or a condo in another area, she might have had better asset appreciation.
But from a rental return standpoint, this same Docklands apartment is still good, with basic weekly rents at 550 AUD so.
A typical 2-bedroom apartment in Melbourne rents from $450-600 AUD per week, while a 1-bedroom apartment rents from $300-500 AUD per week. Prices range from 450 AUD depending on location, size of the house etc. The vacancy rate of Melbourne apartments is currently around 4%, which is healthy. However, there are some areas that have a vacancy rate of 10%. However, as long as the landlords are willing to lower the rent a little bit, it is not a problem to rent out the apartment.
After deducting regular costs such as property, government fees, and management fees, the typical net rental return is around 4%. This rate of return is based on the total price of the property, however, most people will take out a loan to buy the property, so if you put 30% down, you will be able to get a good return. To do the math, the return on this rent would be higher. Ideally, the rent and mortgage would actually be roughly the same, so there would be no income tax on the income as well.
Professional advice from Simon Li, Director of STM Developments
When investing, it is worth considering how to balance the appreciation of the asset against the rental return. A landed townhouse may perform better in terms of asset appreciation, but the rental returns may not be as high. If you don't have high expectations of asset appreciation, look for an area with good rentals, such as near the CBD or schools.
Sometimes buyers are willing to pay more for better orientation and view, but these factors will not contribute to the rental value of the property. You bring in a higher rental return. Whether it's worth it or not, that's something to consider for yourself.
This article is contributed by Juwai Columnist Simon & Vivien.