Home ownership may be the great Australian dream, but carving out a slice of the lucky country is also an aspiration for buyers and investors from around the globe.
It’s easy to understand why a non-resident might be looking at property opportunities Down Under. Australia ticks many boxes on the quality-of-life checklist, from low population density to an idyllic climate and the famously laid-back lifestyle.
However, this segment isn’t immune to the housing affordability challenges that have characterised Australia’s property markets in recent years.
What’s more, overseas buyers also have to contend with restrictions on the types of properties they can purchase, as well as extra taxes, fees, and duties (although you can’t imagine local first home buyers doling out too much sympathy here).
Nevertheless, an ageing population means Australia will need a level of migration in the future and these people will need support as they look for a place to call home. This dynamic creates a prime opportunity for brokers with the know-how to work with non-residents.
New arrivals
In 2024, Australia’s population passed 27 million for the first time, according to Australian Bureau of Statistics (ABS) data, with migration the leading contributor to this growth.
Net overseas migration accounted for 445,600 of the 552,000 people added to the population for the year ending 30 June 2024, greatly outpacing the natural increase – the number of births minus the number of deaths – of 106,400 people.
Overall, migration was the major contributor to the 2.1 per cent increase in Australia’s population size, with the greatest rates of growth seen in Western Australia (up 2.8 per cent), Victoria (up 2.4 per cent), and Queensland (up 2.3 per cent).
Notably, the net overseas migration figure represented a slight dip on the peak recorded in ABS figures for the year ending 30 June 2023. That year, net overseas migration was 23.8 per cent higher (518,000 people), driven by a 72.7 per cent yearly increase in arrivals, driven by a surge in temporary visa holders.
The expectation is these figures will undergo a correction, but it will be interesting to observe what happens next, particularly as Australia enters an election year with both parties under pressure to do something about housing affordability.
Who’s buying?
This slight dip in net migration was reflected in the Foreign Investment Review Board’s (FIRB) Quarterly Report on Foreign Investment for the quarter 1 April 2024 to 30 June 2024.
From 1 July 2023 to 30 June 2024, there were 5,581 approved proposals with a level of foreign investment, according to FIRB data, representing a 15.1 per cent dip on the number of approved proposals in the previous year (6,576). The total value of investment proposals ($6.6 billion) also declined 16.5 per cent from the previous year ($7.9 billion).
As has been the case in recent years, China was behind the bulk of investment with 1,998 approval proposals worth $2.6 billion. However, this figure was 23.2 per cent lower than the 2,601 approved proposals the previous year worth $3.4 billion.
The Australian Tax Office’s (ATO) Register of foreign ownership of residential land for the period 1 July 2022 to 30 June 2023 also provides some insight into the areas and types of properties overseas buyers have been targeting.
The three most populous states proved to be the top destinations for foreign buyers in 2022–23, according to the register, with Victoria, NSW, and Queensland equating for the majority (74.9 per cent) of transactions and 82.7 per cent of the total value.
New dwellings represented 49.3 per cent of all purchase transactions, followed by established dwellings (34.0 per cent) and vacant land (16.7 per cent).
ATO data also showed the majority of transactions (78.2 per cent) were for residential properties with values under $1 million, a slight increase on the figure for 2021–22 (75.4 per cent).
Clearing hurdles
So, how hard is it to buy a property in Australia as a non-resident?
Well, consider the plight of a non-resident looking to buy in Sydney, Australia’s most expensive property market. In addition to their deposit and FIRB approval, overseas buyers also have to stump up a 9 per cent stamp duty surcharge and a 5 per cent annual land tax surcharge.
Austin Rulfs, founder of Adelaide brokerage Zanda Wealth Mortgage Brokers, says these additional requirements make clear communication and understanding overseas buyers’ specific circumstances vital.
“Many [non-residents] are unfamiliar with Australia’s lending rules and property regulations,” Rulfs says.
“I ensure they understand key requirements such as the need for FIRB approval and the potential for additional stamp duty surcharges.” Establishing borrowing capacity is also important.
“Overseas clients often face stricter lending criteria, so I work with them to gather the necessary documentation, such as proof of foreign income and residency status,” Rulfs says.
“I also recommend connecting them with local professionals, like conveyancers who are familiar with foreign ownership laws, to smooth the process.”
However, brokers shouldn’t necessarily be put off by these challenges.
Jason He, founder of Sydney brokerage Kaleido Loans, encourages those who choose to work with non-residents to understand the rules and regulations.
“Many overseas buyers we speak to are surprised to learn that they are able to borrow 80 per cent as many assume due to their situation, they will not be able to borrow the standard LVR,” He says.
“By the same token, don’t assume that all banks will accept your foreign income and apply the same tax rate of your working country for serviceability.
“These buyers are often surprised when we explain to them that their income will be discounted and will be treated with the Australian tax rates which can reduce their assumed borrowing capacity.”
Demand from overseas buyers has seen some lenders, such as non-bank lender Brighten, develop solutions tailored to the unique needs of non-residents.
Chris Meaker, Brighten’s director and head of distribution, tells The Adviser that there has been strong demand for alternative documentation (Alt Doc) loans, with new purchases and refinancing of investment properties particularly common among overseas buyers.
Meaker also encourages brokers to take extra care when working with borrowers who rely on offshore income due to strict responsible lending, anti-money laundering, and best interests duty (BID) regulations.
“This includes ensuring borrowers fully understand their borrowing obligations and regulations in Australia,” Meaker says.
“Communicating in the borrower’s preferred language always helps. Brokers with a basic understanding of international tax rules, such as tax-free thresholds and remittance limits, can further advise their clients.”
Homeward bound
As long as Australia remains a desirable place to live, overseas buyers will be looking for a way to call the lucky country home.
And while the path to property for non-residents may often seem long and windy, it’s this complexity that makes the services of an experienced mortgage broker so vital.
“The Australian housing market can be intimidating, but preparation is everything,” Rulfs says.
“Brokers play an essential role in helping overseas buyers understand the landscape and secure competitive loans.”
