Buying a house in Australia
When moving abroad one of the first issues you need to consider is obviously where are you going to live. This may sound like a fairly simple procedure but unless you do your homework and know exactly what you want, how the system works in your new homeland and all costs associated with property in the country you could be in big trouble. Many people, like so many other issues associated with moving overseas, automatically assume that any foreign system will be similar to the one they are leaving. Wrong!
This particular post relates to “Buying a property in Australia” but for all intents and purposes it could be buying a property anywhere in the world. Even though there are many issues unique to each and every property market around the world, the process you need to carry out before even contemplating acquiring a property overseas is very much the same.
There are many areas to consider which include:-
Location
When moving overseas the vast majority of people seem to concentrate on the larger cities where costs can sometimes be very high and demand can fluctuate wildly with the economic cycle. In many ways it is sensible to look just outside of the city centres into the less populated areas where very often the cost of property can be significantly lower.
Cost
While it obviously depends upon where you move to in the world it can be very difficult to replace a like for like property in your new homeland. In some instances your money may stretch further, in others it may be hard pressed to acquire a similar type of property while in some circumstances your spending power may be fairly similar. However, you need to do your homework not only on the local property markets but the taxes associated with them.
The property market in Australia
This particular thread covers the property market in Australia where there appears to be two main property transaction types which are closed bid and open auction. However, there appears to be some mystery surrounding the so-called 10% increase which many vendors require on top of their asking price. This is not something which happens in markets such as the UK and has confused many moving overseas to Australia.
Closed bid situation
As you might expect, a closed bid property sale is a transaction whereby buyers are encouraged to forward their bids which are sealed and nobody is aware of the price any other party has offered. The final decision is made by the vendor and subject to traditional inspections and surveys the bid is legally binding on both sides.
However, when advertising property sales it appears that many vendors for example may quote $360,000 plus whereby the plus indicates that they are actually looking for 10% over and above the price they have quoted. Whether the $360,000 figure in the example above is a bottom figure which they would consider is debatable but many are concerned and confused by the 10% over and above the price quoted.
Single party sales
Where there is only one party interested in a buying property many people look to be negotiated with the vendor as opposed to going down the sealed bid route which could turn out to be detrimental for either party. This is more the traditional method we see in places such as the UK and something which the vast majority of people would rather use when looking to acquire property overseas.
Alternative ideas for accommodation:-
Build your own property
One of the many discussions on the thread surrounds the idea of building your own property overseas which can, if done correctly, save a substantial amount of money in the medium to longer term. However, if you are looking to build your own property you need to have a very detailed knowledge of the local property market, regulations and any potential issues which may or may not arise. This may be one of the cheaper options in the long run but it is also one which is fraught with potential danger in the short term.
Company sponsored housing
If you are moving overseas to work for your current employer then the chances are that you will, for a short period, probably have access to company sponsored housing. This will take away the short-term worry of finding a property where you can live longer term and allow you to concentrate on settling into your new way of life, new culture and new environment. While it will depend on the company you work for, many people have access to company sponsored housing for anything up to 6 months which should be more than ample time to do your homework and make the necessary arrangements for longer-term accommodation.
Conclusion
There are many issues to consider when moving overseas and while many of these will depend upon the particular circumstances of your move, finding a property for your long-term accommodation needs will certainly be an issue at some stage. Many people tend to move to places such as Australia for employment although those retaining a position within their current firm but moving to, for example an Australian office, often have an easier ride in the short term.
The thread highlights the fact that property acquisition procedures and regulations in every market of the world are likely to be different in some way. Therefore it is vital that you are fully aware of the terminology used, expectations of the vendor and expectations of the buyer. These are the kind of situations where misunderstandings or decisions based upon incorrect information can be very very costly in the long run.
In the thread a number of posters comment on the rather unorthodox closed bid system whereby vendors ask for a figure +10% which can be a little misleading for those unaware of the terminology. If the vendor is asking $400,000 for a property but actually wants $440,000 why do they not just ask for that figure?
There are many reasons why people may look to places such as Australia for a new life but many of the problems they will encounter in the property market are very similar. The only difference may be that some people could have a short-term lifeline in company sponsored accommodation while others may be thrown into the deep end looking for a property almost as soon as they land. Preparation and expectations should be clear before you land in any foreign country!
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{ 3 comments… read them below or add one }
All you expats should be eligible for the first time buyers grant though so that is a nice welcome. It is currently about $14,000 for an existing house and $21,000 for a new one. It does expire in June but most sources say the goverment will continue it. On the down side, some pundits believe this grant is what is propping up the Australian housing market which is remaining resilient compared to the 20% drops in the US and UK housing markets. Hence, if you sell up in GB, USA or NZ your house money may not go as you would have hoped. Unless things drop here in the future…. time will tell.
See http://www.firsthome.gov.au/ for more information.
Buying in Australia is quite simple and can be uncomplicated if you deal with a professional agent…but how to find one?…that’s the problem!..There is a lot more to being a good sales agent than you will commonly find. On the other hand the best selling agent I knew of was a housewife of virtually no training. People trusted her and she was worthy of it but also, she was very clever wih houses and terribly straightforward and rather lovable. She was one in ten thousand though. She ended up living with a famous Australian ‘agent’ of no training as I recall, whose views on auctions make me shudder and who turned the highlighting of incompetent agents into an art form for advertising his own very lucrative franchise system.There ARE times when an auction is the best course for sale but he hasn’t quite grasped the idea.
The information in the article is fairly misleading. Sale by tender, which is called in the article ” close bid” , is not a representative sale device in Australia. Certainly there are plenty of examples of it however it can and often is a time wasting testing of the market for valuation purposes.Tenders are more common in commercial property but again sometimes testing the market and a big surprise might see someone offer the property to the highest tender. Most tenders are accompanied by disclaimer “the highest or any tender may not be accepted”.
The most common for of sale in Australia for decades has been private treaty where a property is put on the market at a price agreed somehow with an agent usually based on other sales indicating what people might pay and then taking into account pros and cons of the particular property.
Some thing to bear in mind for caution is that in recent years technical education has descended from being interested in education into what is paradoxically called “competency based” training and so as agents have over the last 20 years become less competent and far less interested in being thoroughly educated in the knowledge of agency and contract and other aspects of property. This situation supported by the real Estate Institute’s short term sales courses and the downhill run began in 1986.
Owing to the changeover from Government instrumentality based training to what they call “VET” where education in Australia became a profit seeking sausage machine controlled largely by employers. You cannot rely on a salesman’s information as being competent or correct even though they “ought to know” and are required by law to have the knowledge of what was once a profession.They simply are not well trained in anything but selling to whatever method their employer prefers or demands.
You may need a competent buyer’s agent to act for you in inspections and negotiations and organising a proper knowledge of what you are purchasing. This is an area of my own expertise.
Advertisements for homes,the area being discussed, are often accompanied by meaningless or infantile nonsense as to what the agency thinks is an “attention grabber”.Try to find another agent, in Australia not all homes are controlled through exclusive agencies. Agents used to fairly happily share commissions which might find an agent sending you elsewhere after calling an agent with the sort of house you were seeking and share any commissions. This is rare now.
To get well versed in the avalability of houses, ring other local agents and ask them if they have the house you like also listed. One of the tricks used by agents to get exclusively styled listings is to tell the vendor “if you give us an exclusive, we’ll advertise it in the window, put it in the magazine etc etc etc…but if you just give us a non exclusive listing we’ll keep it in the drawer unless someone specifically asks for something like it.” You have no idea what they might find for you.
This the reason Australian agents are rated on a par with used car salesmen and it’s not such a bad comparison. Worse are British agents in France who have no skills no training and no competence,and even less desirable traits, but that’s not where I am discussing.
It is not rare for people to find it difficult to show any interest in those agencies who advertise with nonsense “attention grabbers” and they look around for the same property advertised more maturely elsewhere.Few houses are advertised showing the surroundings of the house and yet, using the world wide web agents advertise world wide but in actual fact are somewhat disinterested in helping you out unless the property carries substantial commission as it might say on Sydney’s forshores or important areas in other states.
Unfortunately people go to foresores agents on the same basis they vote for politicians..they have a big name around Double Bay or Bellevue Hill or Manly or Newport and seem to be able to determine prices on perceived reputation alone. Agents tend to have lists of investment buyers such as solicitors and developers who get an early phone-call so the great value houses, the wholesale sellers are often on the market for about as long as one can argue it was “placed on the market” if at all.
Twenty years ago the need to really do due diligence commenced, social changes were afoot, banks lent too much as speculation on houses seemed to have merit, but in fact the process which we now find ourselves had begun and was hidden by apparent buoyancy…..Though some claim “only one person saw the crisis coming “..some noted figure like Lyndon Larouch or George Soros were the only people on earth who forsaw the global crisis coming, which in fact his boss created, it was utterly predictable. I predicted it in my addendum to my Town Planning thesis in 1992…I predicted 2010 as I recall as being the real drama for real prrperty, so I could still be actually spot-on!
Twenty years ago people still believed houses were great investments…and they can be but you need to be wise and able to understand depreciation for example, to understand most houses used for rental investments are poor in return and when you value a house the potential rental is an important factor. A house bought at retail market value is going to struggle to be a rental proposition in terms of paying for itself on standard deposit of 10% and the national home rental return has rarely varied from 4.75%..nothing to write home about unless the house value is rising another 10% per annum. If you are paying interest there are better investments.
The area alluded to in the article of an undetermined price of say $360 to $400,000 is very much based on agent incompetency, a sort of pseudo auction. Unable or unwilling to make any competent assessment even of “opinion of value” they stoop to that absurd approach.The customary approach was to competently assess an opinion of value or to have the proprty valued. The vendor then made a judgement on what amount they were prepared to sell the property. They might leave some slack and ask for 15% higher and expect an offer up to 10% lower.
When you go to buy a house in Australia an offer of 10% less is customary and ALL offers are expected to be referred to the vendor. Being messed around as the agency awaits higher offers is frustrating and the property probabaly best ignored or just put on an offer of lowest price less 10% and give them a week to give you a definite yes or no from the owner…not the agency. For a short while “guzumping”…running a pseudo auction was banned but some argument was made which had that overturned.
In Australia, unlike Europe, the vendor pays the commission, not the buyer, in almost all cases. You do not necessarily lose all your deposit if you pull out of a deal but you do have a period, contractually, to change your mind, Outside that usually the agent will try to take all the deposit but you can present a case legally that only the taxable costs should be treated as loss.
The second most common sales area is Auctions. It was a very common sales method for crown land but was thoroughly abused by overseas buyers buying land in various names. Auctions in general terms are suited to properties with some special feature making a value judgement worthy of risk. Again, often this is foreshore property. Deceased Estate Property is commonly auctioned to satisfy inheritors or the trustee agreements.It is very common that farming or grazigng land or land of uncertain value as say , an acreage just outside a major town where some opportunistic situation might arise. Lazy minded or incompetent agents who don’t know how to select the proper houses for auction often have their adverts chock-a-block with auctions…put everything possible to auction, then you end up witha sort of “auction commission rent roll” comng in each month.
Property valuations should ba at arm’s length but some isn’t. A common but not the only example could be where a neighbour for example might refuse to pay a price asked or make a low offer for a neighbour’s estate but when it goes to auction pay much more than he previously offered.In the country particularly farmers hate to be thought a fool overpaying for a property in private treaty, but overpaying even more at auction seems to be more acceptable.
Unfortunately spruikers posing as real estate agents saw a great advantage in Auctions, demanding advertising costs and the rest an auction was costly and put the vendor under grave pressure to sell, even by reducing the reserve price.In general terms auctions are not representative of market value as the “special interest buyer” or buyers may fight and pay far more than a property is worth under any other circumstance. You cannot judge value competently through auctions so if you attend one or have a buyer’s agent such as myself attend, make a limit and live with the result. Don’t vaccilate and start getting sucked into the auction vortex.
In stock sales (cattle/sheep) auctioneers take bids off the walls, flowers, blowflies, and have to be pulled up by some meat buyer they are knocking cattle down-to as he chats with his mates.In an auction you cannot be sure any bid is genuine. In auctioning houses much the same happened but government made some attempt to have such fraudulent acts as bidding off the owner,or off some estate agent or some stooge in the crowd, or a ghost or someone’s poodle or a passing car stopped.The supervision hasn’t worked to any great extent.
There were times when Auctions produced some great buys…in other words below market…or closer to market value but today you have to have a very good idea of value before bidding or, be prepared to overpay for some feature. When markets were solid people overpaid at auction because it seemed the public forum was representative of real values but since markets have fallen and the common agency photo of “the old man who waited for the price of real estate to come down” has been generally removed since 1985. Auctions have become the lazy agent’s way of getting quick commission turnover without any costs and you must discipline yourself and have the proprty well inspected even valued before the auction.
I offered this inspection service to agents back in 1975-80, well before it began to emerge, but they regarded my offers of housing inspections as “anti-sales”. Today the disclaimers they make over only offering “information from buyers” and trying to say they have no liability often will not hold water if tested. Agents should be professional enough and interested enough satisfy themselves on detail and be able to advise that detail to vendors without seeing a conflict of interest because they are the vendor’s agent.
As a buyer make a list of questions and ask the agent to reply to them in writing before buying because the list given to the vendor after “exchange” on the property meant to be in the buyer’s interest, concerning inherent defects to property or title, are often incorrectly answered. Sort everything out before you buy in Australia.One rarely used method is to advertise for a particular type of house with lots of detail and let agents answer you however there have long been house hunters for executives, for example, in renting and in buying.By the way it is not at all unknown in Australia for title deeds to be stolen and the property…maybe your property…sold out from under you. You will have to find and sue the vendor to try to recover the money but your prize proprty might be gone forever of it was a “bona -fide” sale. When you rent yor house, make sure the title deeds aren’t accidentally left down behind a drawer or some-such. You will not feel comfortable, however legally safe you are, if you buy someone’s house or land which they never intended to sell.
I re-iterate, buying in Australia can be simple, should be extremely simple but always use an experienced solicitor in the sale, independant of the vendor…As another bit of advice, have your solicitor, not their’s…or their agent,… hold the deposit.
We would be well served if when you found a purchase or attempted purchse, complicated, you tell the agent so and say “when you get it sorted out call me, in the meantime I will look elsewhere”. Buying here should not be complcated, when it is it is typically because the agent makes it so.
Ludicrously the difference in their commission between say 350,000 and 400,000 isn’t huge on a graded system yet they mess buyers around offering houses between those figures or others. Better to act with some maturity, advertise at $410,000 and listen to offers,you the buyer from overseas, decide your own tolerance levels. Hopefully this response will raise an occasional smile but also give some serious food for thought.
Some as Annabel noted expats are able to claim for a first home-owner’s grant but then an expat. in this case is an Asutralian, has to be an Australian. Migrants on a permanent Visa might also get the advantage but as for the rest..why should the Australian taxpayer support people wanting to buy a house in Australia?
Unfortunately the grant is, according to agents, keeping prices high on the lower value houses and the buyers are overpaying for property and are likely to crash and burn when interest rates soar again. It’s that lower priced housing being affected, not property generally and there is a real problem with that. When interest rates rise again young buyers will go to the wall. When people lose their houses after 9 to 13 interest rate riss over a few years they rarely get over it and may have serious health problems thereafter..
There are better assistance systems than the one we have at the moment and it’s also wrong for “it” whatever it is or becomes to be not available to all young Australians for ever more if that’s the one the Government selected,but it’s a pity what was intended to help buyers and the the construction industry has been sidetracked.
In closing, once the assistance goes away the houses bought at the inflated prices using it will probably not sustain the increase, affecting the first home owner’s return on sale.
Hi. We are moving to Ipswich (just outside Brisbane) as soon as our visa comes through. Does anyone know how we can organise a rental property from England before we go? We have 2 year old twins so it would be a lot less stressful if we did nt have to rush round looking for a house when we first arrive. Thanks from Kate