For South Africans thinking of investing in the Australian property market, now could be a good time. Scott Picken, CEO of International Property Solutions, has just returned from four weeks in Australia exploring the market and believes that good opportunities exist.
“The current global uncertainty and the lack of available credit, the Australian economy has slowed but the situation is not as dire as in the UK or USA,” comments Picken. Australia has four of the top 15 most secure banks in the world, which gives stability to the market. In addition, government initiatives and falling interest rates have helped stimulate demand, particularly at the affordable, first-time-buyer level.
Falling interest rates over the last 4 months have reduced mortgage costs by some 30% and affordability is rising dramatically. The rate of new construction has fallen behind population growth, intensifying pressure in an already congested rental market – the market is currently undersupplied by some 100 000 homes per year.
The Foreign Investment Review Board regulates who can invest in Australia, and IPS can assist with applications to the FIRB. Non-residents are only allowed to buy new-build houses or apartments from developers.
The average rate at which one can obtain a mortgage is 6.2%. “The banks work on one’s personal affordability when determining how much one can borrow, and non-residents can expect to work on a 70% to 80% loan to value ratio,” says Picken. They also take into account 80% of your rental income.
IPS has sourced the best projects in the many cities examined and is focusing on Sydney, Melbourne and Brisbane. “It is clear where the market activity is and we believe investors should focus on the $350,000 to $600,000 range in either inner city apartments or houses which are in strategically good locations,” advises Picken.
There are attractive packages on offer such as those from Devine, the third largest developer in Australia, which is developing homes in Melbourne, Brisbane and the Gold Coast ranging from $300,000 to $450,000. These are large, attractive family homes such as we are used to in South Africa, with superb finishes. There is such a high demand by renters for these properties, IPS has sourced a management agent who has a vacancy rate of less than 1% and because of this they offer investors a rental guarantee for 10 years. If investors move to Australia and want to live in their properties, there is no penalty for doing so – a perfect option for many South Africans!
Although one should always time one’s investment carefully, Picken points out that there are several benefits to investing in Australia now. In addition to certain sectors of the market starting their upturn again and a strong rental market, owning a home overseas, investors have a potential rand hedge, can also build up tax credits and their credit ratings in Australia and could ultimately assist them in getting citizenship.
Picken says, “The most important factor with Australia is that each year they allow 177 000 immigrants into the country and they either have one of two things. Vital skills or money, both which ensure Australia just continues to get stronger and stronger as a country! Understanding these long term fundamentals is vital to ensure long term success.”