'Why I bought a property in Australia': A Singaporean shares her experience on what it's like to invest in Adelaide

With ABSD rates at their highest ever (not that we've ever seen them go down!), it's time for Singaporeans to think outside the box. Or in some cases, outside the country. This week, we spoke to a property investor who bought a property in Australia. These are her experiences and insights into what it's like, to own a property down under:

Looking beyond ABSD…and Singapore

Our reader, P, has always had a passion for investing; but with ABSD rates now at 20 per cent for a second property, she's started to look outside of Singapore. In particular, Australia strikes her as being the next most attractive location. P says that:

"The property law and conveyancing is similar to Singapore's, and I was able to understand quite easily the legal process from booking a property up to completion. Above all, Australia is near to Singapore as it is just a few hours' flight away, and I can fly over whenever I want to have a look or feel of my property."

P does, however, stick to residential property still; she doesn't feel too familiar with commercial or other property types in the Australian market. Perhaps it's just that, wherever in the world you go, there are some universal elements to a good home. 

P says her main focus is on cities like Melbourne, Perth, Sydney, Adelaide, and Brisbane. 

Shortlisting properties and house-hunting in Australia

P says the usual key factors of price range, location, and property type still apply: 

Price range

"Ensuring that the property is within my affordability is a crucial first step," P says, "This includes not only the initial costs like down payment, stamp duty, FIRB fee, and legal fees, but also the ongoing costs like monthly loan repayments. It is important to have a clear budget and financial plan to manage these expenses comfortably."

The Foreign Investment Review Board (FIRB) has to grant its permission for foreigners to purchase property in Australia. The FIRB fee is paid upon application, and is based on the value of the property:

Location

"I focus on selecting a property within or close to employment precincts or high-growth areas," P says, "Properties in such locations tend to have higher rental demand and greater potential for capital appreciation. Government development plans and infrastructure projects can significantly boost the desirability of the area and property values over time."

Property type

P says her preference is for landed property over apartments, even in Australia: "Land generally appreciates over time. Additionally, opting for an off-plan 'house & land package' offers several advantages, including cost savings on stamp duty and the ability to customise your property according to your preferences. A full-turnkey package can also simplify the process and make it more efficient, saving my time and effort."

In this context, "off-plan" simply means a house that hasn't been built yet. Note that foreigners can only buy vacant land (with the intent to build on it), or new dwellings. 

A "house & land" package is a sort of bundle deal, where you get both the land and the services of a builder (contractor) at once. It's possible to buy the land and then engage a builder separately,  but this is a much more involved process. 

A full-turnkey package loosely means the house is ready to move into right away. According to our other sources in Australia, the exact definition can vary a bit, so it's always best to check with the developer. 

Getting prior education and help

P didn't just jump straight into buying overnight. She says:

"I attended numerous seminars, workshops, property showcasing events held in Singapore on Australian property investments. I also read up on news articles on these topics. 

Such educational activities enable me to have a good understanding about the legal and regulatory requirements for foreign property ownership in Australia. In addition, prior to committing to a property purchase, I would seek clarification with the real estate professionals for any doubts that I might have."

Besides this, P also had to learn about the cultural and geographical differences between our two markets:

"Australia is vast with regional variations in property demand, while Singapore is small and highly competitive, leading to higher property prices," P says, and "Australia offers rural diverse property types, including apartments, townhouses, landed homes, etc.; whereas Singapore primarily has apartments and limited landed properties." 

One major difference is between stamp duty and taxes:

"Australia has varying transfer duty (stamp duty) rates, additional duty rates on property purchase for non-residents, and the capital gains tax upon sale of property," P says. But as taxation can vary between states, it's best to get specific advice from professionals (especially solicitors) who know the area well. 

P had help from professionals with Goldbach Property, where she says she had a good experience:

"Unlike others claiming to have the best offerings, they provided me with a thorough analysis of the property markets in Australia…I got insight into the importance of diversification across different states, to address the Land Tax issues."

This is one of the main differences Singaporeans may need to get used to in Australia. Different states can have different rules and tax rates, which can impact investment decisions. This does make certain roles, such as conveyancing, more involved than they might be in Singapore. 

P says the professionals at Goldbach also handled some of the key steps for her, such as "Overseeing documentation, engaging the solicitor, mortgage broker, land settlement, house construction with progressive payments, house completion, insurance, and property management."

With assistance, she managed to buy and lease out a property in Adelaide, within 9.5 months of executing the contract. 

Financing and property management

P says that, since 2016, it's been tough for foreigners to get an Australian bank loan, as "Their banks are not allowed to provide a mortgage for non-resident foreigners."

Nonetheless, one of the consultants at Goldbach helped her find a mortgage broker, who helped her source a loan. She says: 

"I recall it was during the era when Australian banks tightened the borrowing limits for foreign buyers…most foreign investors had to turn to the non-bank lenders for financing, which normally cost a little higher. I was fortunate that my loan application was finally approved, and my land plot was settled after around three months of signing the contract."

In Singapore, local banks may not provide a mortgage except for certain specific areas (usually the priciest locations near the CBD). This may not be ideal for investment purposes either; so you might need to approach mortgage brokerages in Australia. (Or as in P's case, approach a firm that will handle it for you). 

Besides financing, however, P also faces the challenge of property maintenance, as well as finding viable tenants. As she's not in Australia all the time, she elected to use a property management company:

"For regular maintenance, the property manager carries out a regular inspection of the property, and sends me the inspection report. Any issues are flagged, and she will seek my instruction on whether or not to proceed with repair or replacement.   

With respect to tenant selection, the property manager sends me the profiles of the potential tenants who made an application…besides furnishing the prospective tenant's profile, they give their views about the tenant, their impression from their face-to-face interaction; and they may even do a credit check, or check with the tenants' previous landlord. Based on the profile and input given by the property manager, I then decide on which tenant I would be happy to have."

Occasional challenges and shocks 

While her purchase in Adelaide went smoothly this time, P says she had a negative experience prior to this. 

"I had an experience with a vendor who failed to deliver the property, after four years of the contract exchange," P says, "and I had to withdraw from the deal. Although the deposit made was refunded, there were still some fees incurred, and most importantly it was four years lost! That was an opportunity cost for me as an investor."

There was also a moment when the Australian government made a decision not to permit loans for non-residents' property purchases. While the resulting loan issues were ultimately settled, P says it is something to be wary of, when investing abroad. 

Advice for those thinking of buying in Australia

If you're thinking of an Aussie property, P suggests the following: 

• Learn from an expert who is knowledgeable, and has good insights into the different property markets of different states and cities in Australia
• Find out from one or more property investors who have real-life, personal experience in property investment in Australia.
• Set a realistic goal for the property investment. Do not expect a quick capital appreciation within a short period.
• Start the property investment journey as young as possible, or as early as possible, and purchase a property that is within your means. Do not drag on, just wanting to wait for "the best time" to enter the market. 

ALSO READ: Property investments: When high risks meet high rises

This article was first published in Stackedhomes.