A February 2015 report carried out by the Organisation for Economic Co-operation and Development (OECD) revealed that Australia has the sixth most overvalued property market out the organisation’s 34 countries.
Indeed, a quick glance at recent Australia Bureau of Statistics housing figures highlights the fact that Australian property is not exactly cheap. Figures released at the end of last year show that in September 2014 the average price of an Oz property was AUS$571,000 – 16.4 per cent higher than it had been three years earlier.
However, delve a little deeper into these figures, and a slightly different picture emerges. You see, while the national average house price may have increased steadily over the past three years, this growth has only really been driven by strong property price rises in three states – Victoria, Western Australia and, particularly, New South Wales.
In fact, the average property price in NSW – Australia’s most populous state and home to immigrant magnet Sydney – increased by a massive 29.9 per cent between September 2011 and September 2014, taking the average price of a home in the state to just over AUS$700,000.
This trend is one that, at the start of 2015, is expected to continue for the foreseeable future.
CoreLogic RP Data found that house prices in Sydney, as well as Melbourne and Brisbane – all popular immigrant locations – increased in January 2015 compared to a month earlier, while Hobart’s property market, having been sluggish for years, is also starting to record price increases. However, average prices decreased in Adelaide, Canberra and the previously booming Perth, further highlighting just how mixed the country’s housing market really is.
Given Australia’s rather hefty property prices, particularly in the locations traditionally popular with new immigrants, the chances are that many newcomers will need to take out a mortgage in order to finance their property purchase.
Fortunately, eligibility criteria for mortgages in Australia are generally quite good, and you can borrow up to around 80 per cent of the value of a property if you’re not an Australian national – the minimum loan is AUS$100,000. Rates start from 4.69 per cent for a one-year fixed deal and 5.69 per cent for a five-year fixed deal.
Lenders will use affordability calculators, which can differ from one institution to another, so maximum borrowing amounts can vary significantly. Many will use a debt coverage ratio that takes into account anticipated monthly capital repayments on all mortgages, so that the sum total of all mortgage and personal loan commitments does not exceed 50 per cent of your net monthly income.
In terms of the property buying process, each state has slightly different criteria. Generally, though, you will have to make an offer in writing for a property – although it can be verbal depending on where you’re looking to purchase. Any offer you make is not legally binding until both you and the seller have signed a Contract of Sale or Contract Note – this contract will include any caveats, such as dependant on successful building inspections, which need to meet before a sale can be finalised.
Your finances need to be in order before you make an offer as, if accepted, you will need to cover the deposit (generally 10 per cent of the purchase price), and have the remaining money available for settlement. Settlement of the property usually happens between 30 and 120 days after you buy the property.
It’s also worth noting that many Australian properties are sold at auction. Before taking part in an auction it is essential to seek expert and legal advice from estate agents and lawyers, so that you are aware of exactly how the process works. It’s also important not to get carried away in the adrenaline rush that auctions can cause and end up bidding far more for a property than you had originally intended.
If you’re looking to purchase a home in Oz prior to becoming a permanent resident of the country, then you will first need to seek permission from the Foreign Investment Review Board. This permission is typically only granted to those seeking to buy a new-build or off-plan property.
If you find yourself initially priced out of the property market in the area in which you’d ideally like to settle, then you could always consider renting. Most rental terms will be for a minimum of six months, and after the six-month term it is usually possible for the lease to be extended on a weekly or monthly basis provided both you and the landlord agree to any changes in conditions such as a rise in rent. Lease agreements in Australia usually confirm to a standard format.
However, due to changes in taxation law in recent years, it has become less financially advantageous for Australians to buy property for the purposes of renting them out, so rental homes in popular areas are often in short supply and can therefore be expensive. For example, the average price of a rental unit in Sydney is an eye-watering AUS$795 a week – although this can be far higher in the more desired locations.
That said, if you’re looking to settle in a small, rural location, then according to January 2015 CoreLogic RP figures, it is still possible to rent properties for less than AUS$150 a week in some areas. Newborough, located in central Victoria, was found to be the country’s cheapest city in terms of average rental prices (just AUS$120 a week), followed by Queenstown, Tasmania (AUS$143) and Millicent in South Australia (AUS$148).
While you may end up paying more for your property than you had originally hoped, the plus size is that you will almost certainly be getting far more for your money.
The average size of a house in Australia is 243m2 (the UK’s is 98.6m2). What’s more, three in every four Australian homes has a spare bedroom, and the average home has no less than 3.11 bedrooms, according to ABS data from 2012.
Vast outdoor space is also a feature of many Australian properties. Given the country’s fantastic climate (even the coldest state, Tasmania, enjoys a balmy annual average temperature in excess of 16oC) Australians understandably like to spend time outdoors, and their choice of housing certainly reflects this.
Entertaining areas, often featuring built-in barbecues (naturally) are common, while outdoor swimming pools are far from an unusual feature.
Air-conditioning also usually comes as standard, while in some areas the style of housing is also built to suit the climate, as well as its wider surroundings. For example, in tropical areas of Queensland, many houses are built on what appear to be stilts. Not only does a raised house allow for better, cooler, air circulation, it also protects from the threat of floods and prevents some of the area’s less welcome wildlife visitors – snakes for one – from slithering uninvited into your abode.
The cost may undoubtedly be high, but the standard of hose you could find yourself living in Down Under, may just make up for this.
You can find out more about life in Australia by exploring the Oz section of our website.