With interest from property investors also strong in most states, Jo-ann Hodgson ask Jenese Malone from PR Australian Properties Pty Ltd about the opportunities for overseas buyers.

Jo-ann Hodgson: What's the main trend in the Australian property market at this moment in time?

Jenese Malone: In the recent past there has been rapid increases in house prices. Whilst this has levelled out somewhat over the past couple years, prices are still increasing and experts are predicting new price booms, starting in Sydney, Brisbane and Melbourne. People considering retirement have been buying property as a wealth-creation vehicle, as the cost of ownership and associated fees are paid for by the tenant and the additional tax they receive. Younger couples are looking to rent and buy further out of the cities as it is more affordable, the baby boomers are changing from their larger properties to smaller ones with less upkeep and professional couples are looking to work from home and are buying properties suitable for them to each have an office and have easy commuting time.

Jo-ann Hodgson: How has the Australian property market changed over the past few years?

Jenese Malone: The property market has changed at a different rate in each city. For example, people were flocking to buy investment property in Perth from 2004 but are now buying into the South East Queensland region.

Also, recent changes to the Australian Government Superannuation scheme has resulted in more employees putting larger lump sums money into their superannuation.

A one-off ruling was granted that people could place AUS$1million into their super pensions before the end of the financial year in June and it would be tax free. This caused a change in the property investor market. However, recent figures have shown that 30 per cent of all sales are to property investors wishing to capitalise on the tax incentives in Australia.

There has also been a distinct move towards smaller properties from the baby boomers and younger families, who are moving further out from the cities as it is more affordable. Being 20 kilometres out of a city no longer offers commuting challenges as governments have been providing highways, trains and better transport facilities.
 
Jo-ann Hodgson: How do you expect the market to change over the next few years?

Jenese Malone: With the reduction in first home owners buying, I expect there will be an increase in rental demand and that will also push rents upwards. Most experts are in agreement that Sydney, Melbourne and Brisbane/Gold Coast will have the best capital growth over the next few years.

If the Government increased the First Home Owners grant that may change but this is not seen as apparent at this time.

As immigration figures increased this also impacts on foreign investment. Many immigrants rent for six to 12 months before they buy a property to live in to make sure that they have chosen the right area for them.

Jo-ann Hodgson: What are the best areas for Australian property investment?

Jenese Malone: Brisbane and the Gold Coast continue to have the greatest population growth. For every 10,000 migrants (that is also Australians moving from one area to another as well as those from overseas) means 3,700 new properties required and will achieve AUS$70m in retail spending. Melbourne south-east and south-western corridors will also offer excellent returns and both areas are expecting an increase in rental payments which will also give a better rental yield than currently achieved.

Jo-ann Hodgson: Do many Brits invest in Australian property?

Jenese Malone: We received a fax from Charmaine Aynsley, from the Australian Treasury Department, which stated that during the 2005-06 year a total of 830 foreign investment proposals involving UK nationals were approved, representing AUS$618million of total proposed investment.

All non-residents who invest in property have to apply for Foreign Investment Review Board Approval (FIRBA) before they can do so, unless they have Permanent Residence (PR) here or citizenship.

They can only buy new and not second-hand properties, and on resale property it has to be sold to an Australian or someone with PR. However, that ruling is the same for Australians as we can not sell our properties to off-shore people as it is then a second hand property. The definition of second-hand is if the property has been registered in someone else's name before the non resident purchases it.

There are significant benefits for the people considering migration to Australia to invest prior to their move as they will have established an Australian Credit rating. In the event they do not do that many lenders will not lend funds for cars or homes to new immigrants until they have had two years work history here. Having a mortgage prior to the move negates this rule. The Loan Value Ratio is more as a resident borrower than for a non-residential borrower. However, when they relocate to Australia the loan can be transferred to a residential loan giving them more funds and being able to access their initial deposit plus any equity growth for another purchase for themselves or investment.

Unfortunately, many UK residents think that by having a bank account in Australia that it is establishing a credit rating when, in fact, that is not the case.

Jo-ann Hodgson: Is there a strong rental market in Australia that could provide steady returns for British investors?

Jenese Malone: The answer to that is a resounding 'yes'. Australia has a strong economy, is politically stable and safe with strict consumer protection laws. There is a Residential Tenancy Act which offers protection for the tenant and the landlord. The laws of Australia are based on British law which means that the laws behind real estate conveyancing are familiar.

There is also a Privacy Act in Australia that protects the consumers and reduces risk of unwanted marketing or soliciting. The Office of Fair Trading and the Australian Competition and Consumer Commission are the watchdogs appointed by the Government to make investment safe and reduce risk.

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Article first published 29 June 2007