Buying property overseas

According to the Macquarie Property Outlook released on 9 August:

The media release says that Australians are increasingly looking offshore. I note that even our former premier has bought property overseas.
http://www.parliament.nsw.gov.au/prod/parlment/hansart.nsf/V3Key/LA20040406014 (Although query whether he overpaid?! )

The media release goes on to note that

On the domestic residential front, Macbank head of property Rod Cornish's view is that only Perth will offer solid growth over the next 12 months.

Of course, as Cornish notes, most investors will access international property indirectly through Listed Property Trusts or unlisted syndicates and funds. However, it got me thinking. Is there a place for direct international property in one's property portfolio?

Of course issues like cross border tax, currency fluctuations and legal uncertainties would all be challenging to overcome - particularly in countries with differing legal systems and customs to Australia. Some countries (Australia included) also impose restrictions and consent requirements on foreign investment.

I know residential investment in NZ and the US has become something some Aussies are doing at the moment...but what about other opportunities?

What do people think?

Cheers

 

I would imagine that most Australian investors wouldn't have the time or inclination to even consider direct international property investment. As you've pointed out, property trusts and funds are so much easier and less of a property management headache

The only way I would directly invest in property internationally would be if I had a personal recommendation of someone local who could help out (such as a fellow investor or Buyers Agent who came highly recommended) and, even then, I'm not the type of investor who would buy a residential property sight unseen.

There are rules and laws that govern buying in Australia from overseas, which are well explained on the Foreign Investment Review Board site: www.firb.gov.au
I would gather that each country would have their own separate rules regarding property contracts as well, so these would need to be investigated.

 

A timely topic. I received an email today from a client who is acting as a buyer agent to assist people to purchase property in Bulgaria !

The web address is www.bulgarianpropertybuyer.co.uk

I have downloaded the kit but yet to take a look.

Would have thought a nice little hut on Santorini a better choice !


NickM

 

I'm toying with the idea of buying OS right now. Either Singapore, where we live at the moment, or Japan, where my wife is from.

Both markets have been flat or declining for quite sometimes though the last set of figures have shown a slight upturn in both. We're just trying to work out which country we feel safer with and how easy it for us to qualify.

From my first observations, CF+ places are available in both markets. I'll update this thread if and when I decide to go ahead.

 

I just got back from an overseas trip and stayed at a hotel/resort that has some apartments/villas for sale for what I thought was a reasonable price plus they guaranteed 10% return in the first year.

It was Australian owned and managed, and I spoke with the guy for a few hours about everything that was involved, and am now seriously considering it.

I was just wondering if anyone had any experience with buying international property, and had an tips and advice in this regard.

Also is there any major differences between buying investment properties in Australia and abroad come tax time?

 

Earlier this year, we looked into buying an apartment in China's second tier city. We found one that came recommended by a friend who lived in this city for a few years. The investment market for foreigner in China is very new and immature, it hard to obtain information as the Chinese do not like to pen down the work process, everything is by word of mouth. Plus there is very little protection in home ownership.

In the end we decided against purchasing due to the currency risk.

Attached is a recent article on Chinese investing in Australia:
Chinese snap up Australian properties

I am still procasting on the issue, now that the AUD has increase in value, the risk is lessen, however the window of opportunity for the earlier invesment has closed.

 

Have properties in NZ. Interest rates are higher but so are the rental returns - on balance they have returned at better rates than in Oz. Capital growth has been flat for a while there as well.

Yes, we need an accountant in NZ, submit NZ tax returns, etc. Not an unsurmountable hassle. Changes to our tax laws means that not only foreign source gains must be declared, but foreign source losses should be able to be claimed, which simplifies the issue of appropriate structures and sort of make the process more 'familiar'.

Like everywhere, you need to research and understand the market. Be wary of very small apartments in Auckland (ie, less than a parking space in size - these are no longer allowed to be built) for students.

Chris C, I'd be wary of foreign apartments guaranteeing 10% for the same reasons as holiday apartments in Australia. The return is largely built into the price, then after that period of a few years when they're starting to look tired they offer discount rates for tourists (perhaps were you stayed in one?) and the returns fade and maintenance costs go up - be wary.

Cheers, Dave

 

This brings up an interesting issue, financing.

When looking to purchase overseas property, I'm assuming most people look to get local finance as well?

The country I'm looking at is Indonesia, and unfortunately buying property as a foreigner is semi-complicated, but you definitely can't get finance using the property as collateral, and I'm not sure if they would secure it against Australian assets. So my understanding is that my only other option will be to borrow in Australia. Please if anyone has more experience on the matter I'd love to know more details.

Very good advice, though I'm not quite as concerned about the return as I am the longer term viability of the building structure. Having spoken with the owner, having seen his records and books, along with visiting most of the surrounding resorts and getting the various relevant details. I think a 10% return is very achievable given their track record. To be honest with a bit of better marketing (which is what I do for a living) I think a 15 - 20% return is potentially achievable, my real concern is that Indonesia, is well Indonesia.



From my quick search I don't even know if there is such a thing as Indonesian Building and Pest Inspectors.



The only confidence I have is that this place is presently owned by an Australian, and the building project was managed by an Australian, but it was still built by Indonesians with Indonesian materials, which concerns me a bit.

 

We set up a trust entity with a local accountant and loaned locally - neatest way at the time, maybe not needed now. I have heard of others taking equity from their property in Australia and using that to buy the overseas property. But the banks don't secure a loan in Oz against an IP in NZ (from what we found anyway) ... despite being the same banks. Once you've got the first one overseas it can then be collateral for others.

Indonesia would be very interesting. They may not have building inspectors because there may not be any building codes for them to check against May risk fluctuations as tourism ebbs and flows. Good luck.

Dave