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A Quick Guide to Getting On and Getting Ahead In Australia’s Property Market

embraceaustraliaadmin | Saturday, April 9th, 2011 at 4:42 pm

Introduction

Australia draws people from around the globe with its relatively stable economy, high standards of living and equally high life expectancy. The land Down Under has good education and health care, not to mention a wealth of outdoor space, natural wonders and unrivalled sunshine.

So whether you’re looking to quit the UK in favour of a better climate and a better way of life or invest in a market that has managed to avoid the worst of the global financial crisis. While property prices in the UK (with the exception of central London) have dropped considerably and are likely to fall further, those in Australia have not been affected.

Many believe that the Australian housing market is impervious to the crisis which has gripped most of the rest of the world while others say that house prices are and have been artificially inflated for some time and the cyclical nature of all housing markets means that Australia is due a downturn. Only time will tell how stable the market is but the simple fact is that house Prices in Sydney are soaring and those in Perth, Melbourne and Canberra are showing signs of following suit.

Overview

Unlike the UK, Australia’s property is primarily single story but like the UK the easiest way to make a profit is to find something under market value and to renovate or choose an area undergoing regeneration.

There are estimated to be 131,000 new dwellings being built in 2010/2011; 50,000 less than is required to even keep the housing shortfall at a steady level. This lack of housing is pushing property prices up and in many areas out pricing first time buyers according PK Property.

Due to high property values out pricing most first time buyers now is the opportune moment to invest in buy-to-let properties. Rental vacancies in Sydney are at a record low of 1 percent meaning that the area is crying out for rental properties.

When looking to purchase a buy-to-let property the foreign investor should be aware that the government has a number of restrictions on such business. The general rule is that to invest you must be living in Australia either temporarily or full time whether this is through a Temporary Entry Visa, a student visa or someone being granted a Permanent Residence Visa.

No matter how many properties you buy, where or when or how long you own them for, if you leave Australia and do not have a valid bridging visa you must sell all real estate even if it will be at a loss.

There is an exception to the rule however; if you apply to the FIRB (Foreign Investment Review Board) permission may be granted to purchase vacant land or an existing property for investment purposes if the investment can be proved to assist the local community and its housing needs.

Projections

Sydney property has a long term trend of doubling every 7-10 years and BIS Shrapnel, a leading economic forecaster has predicted a 21 percent rise over the next three years based on the estimation of a shortfall of 308,000 dwellings. In the long term the gap between supply and demand will only increase due to restrictions on building and the ageing population.   

 

 

This, combined with a stable local economy and a lot of foreign attention means that Sydney is a sure fire bet for investing over the next six to nine months while the housing market slows during the recovery from recent natural disasters.

All major population density areas are predicted similar growth to Sydney over the next 7-10 years both in terms of population and property values. Rural areas will see a smaller increase and so may be a better place to invest but here is a simple rule; try to stay within 45 minutes of a major metropolitan area as these areas are likely to develop and be given transport links in the future. A direct rail link to Sydney could add up to 10 percent to the value of your home.

Another tip is to stay around the coast, it may sound obvious but a large portion of Australia is little more than desert so any expansion is likely to move up and down the coast rather than away from it.

Mortgages

All Australian banks offer competitive mortgage rates. The four big banks; Westpac, Commonwealth Bank, National Australia Bank and Australia and New Zealand Banking Group have a majority share of the market and so will always have an offer going, normally an introductory rate the same as a savings account so always take a good look at the numbers, make sure you know about any fluctuations in the cash rate when buying so that you know whether to go for a tracker or fixed rate.

In terms of deposits you can get 100 percent mortgage but unless you really know what you are doing go for at least a ten percent deposit, after all you don’t want to be in negative equity. 

 

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One Response to “A Quick Guide to Getting On and Getting Ahead In Australia’s Property Market”

Comment by Prentiss — April 12, 2011 @ 2:30 am

You should check the latest global headlines concerning Australia’s property market. Most concur that the real estate bubble there is beginning to burst in a big way. Don’t take my work for it, look at the current numbers, it doesn’t look good.

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