We’ve all dreamed about buying a house abroad, whether it be a holiday home, retirement patch or a tidy investment. But making this dream a reality can become a nightmare when sifting through all the rules and regulations around foreign property purchase. When townhouses, apartments, condominiums, and bungalows – all available to varying degrees around the world – meet leaseholds, cross-leases and joint tenancies that vary both in title and function, things can get a little confusing.
At OFX we like to keep things simple, so we’ve stripped away all the jargon and condensed they key information into plain English. Once you understand what’s on offer, you can start to build a budget and investigate property tax requirements to build the bigger picture of your entire foreign investment.
New Zealand
Our neighbouring island, New Zealand is naturally popular with Australians. There are some key points worth noting for any foreigners with their sights set on a Kiwi nest.
What’s available:
- Freehold and leasehold: According to Cowdy.co.nz these are the most common forms of ownership. Lamrocks Solicitors say that freehold is sometimes known as ‘Torrens title’ in Australia. Freeholds have three types: fee simple, life estate and stratum estate.
- Cross-lease: Cowdy.co.nz say the cross-lease is similar to a ‘group title’ or ‘strata title’ whereby a property or a piece of land is owned simultaneously by separate parties. The land remains undivided despite separately recognised ownership.
- Unit title: Like a cross-lease for apartments, unit titles permit ownership of the space within, and ownership of the land according to the size of the apartment
Things to know about New Zealand
- According to the New Zealand government website, you must have an IRD Number (equivalent to the Australian TFN) to buy, sell or transfer property.
- You may also need an IRD Number to have a fully-functioning New Zealand bank account.
- With an active bank account and relevant documents, complete an IR742 Form and submit to the Inland Revenue for your IRD Number.
- Australia has a handy Social Security Agreement with New Zealand, giving you tax credit in one country for income tax paid in another. You can find more information on the Australian Department of Human Services website.
- Consider raising the funds in Australia and using a foreign exchange service to send the money direct to the seller. OFX has offices in both countries and our foreign exchange experts are available 24/7 to help you get the most out of your money.
Beware of:
- Unlicensed estate agents. The New Zealand government website advises you to ensure real estate agents are licenced and to check whether they’ve received any major complaints.
United States of America
The USA also has strong ties with Australia. Despite its notorious customs and border control, ManhattanMiami insist America is very liberal regarding foreign property ownership. Zillo.com’s foreign property guide claims almost $70bn was invested by foreign buyers in a single year alone.
What’s available according to Zillo and ManhattanMiami:
- Fee simple (fee simple absolute) & leasehold: Identical to fee simple in New Zealand and leaseholds. “Lessor” and “lessee” are local titles for leaseholder and occupier of the property.
- Tenancy in common: Two or more parties own an un-partitioned piece of land or property, similar to the cross-lease. The members own the entire property jointly, rather than individual sections.
- Joint tenancy (also joint tenancy with right of survivorship): Like tenancy in common, both parties have separate ownership of a single, undivided property. Unlike TiC, death of one party gives the survivor ownership of the entire asset.
- Community property: Common among married couples – property is jointly owned like all assets acquired during the marriage. In the event of a divorce, assets are divided by the courts.
- Foreigners can buy an array of properties; townhouses to condos, bungalows and apartments, but may find it hard to buy cooperatives. Coops are run by corporations with company shares exchanged for long leases.
- According to Zillo, Florida, California, Texas, Arizona and New York are popular places among foreign buyers.
Things to know about the USA
- Buying real estate grants you no right of stay or citizenship.
- Property legislation varies across the 50 states, visit the state website to get familiar with the local laws and customs.
- “Realtors”, as they’re known in the US, are highly fragmented so expect to shop around to find a perfect match. Many charge a fee to show you around and investigate properties on your behalf.
- You’ll need an Individual Taxpayer Identification Number (ITIN) to process your tax as a foreign national. A Form W-7 can be found on the IRS website.
- Your “down payment” as a foreign buyer is normally 30-40 percent of the asking price when financing through American banks.
- Alternatively, banks may set a loan limit of $1-2 million as well as requesting proof of required income.
- You’ll need a good credit score to apply for a loan so if you don’t have a credit card, financing could be difficult.
- Another option is to finance from home and send the money with a foreign currency provider. With OFX, AUD to USD transfers can often be completed the next working day.
Beware of:
- FIRPTA: The Foreign Investment in Real Property Tax Act of 1980 and it’s rulings on the sale of foreign property is relevant documentation for any foreign investor.
United Kingdom
As the Head of the Commonwealth the UK has always been attractive for Australians. Whether or not you have a British visa, you won’t be restricted from buying property. The only difficulty you may have is affordability, particularly in London and around the South East.
What’s available according to GlobalPropertyGuide and HomeOwnersAlliance:
- Unlike America, there are no restrictions on the types of property that can be owned by foreign individuals. Freeholds and leaseholds exist in the same capacity as in Australia.
- Joint tenancies and tenant in common arrangements also exist as they do in the United States; joint tenants may contain a right of survivorship clause in which the tenancy is transferred in the event of death, and tenants in common permits unequal investment in the property without right of survivorship.
- Terraced houses are the most common form of housing found in inner-city areas, and are highly sought after.
- Apartments (sometimes called flats) are also common and run by either housing associations, private individuals or government-appointed councils who sell property at a reasonable rate to generate capital for improved housing projects.
Thing to know about the UK
- Stamp Duty is paid in the UK as in Australia. The calculation of Stamp Duty also differs from Australia. Use the UK government’s Stamp Duty calculator to find out what you’re expected to pay, particularly if the property is priced highly.
- Combine the above with legal fees, surveyor fees and Land Registry (the equivalent of Australia’s Land and Property Information) and you should have a pretty clear picture of the budget needed for the transaction.
- Unlike the US, UK property agents are paid a commission by the seller for putting their home on the market.
- Property lawyers in the UK are called ‘conveyance solicitors’ and are highly advised for peace of mind.
- The Royal Institute of Chartered Surveyors (RICS) are the most qualified in the country. Find out whether you’ll need a Condition Report or a more thorough Homebuyers Report to avoid wasting time and money.
- It’s normal to make a verbal offer to the seller’s agent which they will then use to inform both solicitors.
- Non-UK citizens should expect to pay a deposit of at least 30% according to Exfin; the Australian Expat website.
- If financing through a UK broker, mortgages can take an average five or six weeks to process.
- The shortage of available housing in South East England has led to a rapid increase in prices, so many believe so there’s great opportunity to be had in the UK.
- Although you can secure a UK mortgage at around 3-5 percent interest, you can also finance from home and transfer the funds to the UK. If you have matured a relationship with your domestic bank you can borrow against existing assets to speed up the process.
- Should you take the above route, be sure to send the money with an established currency specialist to avoid heavy fees laid on by the banks – potentially saving you thousands. OFX has helped over 300,000 customers transfer over $84bn since 1998.
Beware of:
- Making verbal offers in Scotland. They may be legally binding according to GlobalPropertyGuide.
- The impending pop! MoneyWeek believe London is in a “housing bubble”. If it does burst it will have serious consequences for any foreign buyer.
Thailand
Thailand’s exotic climate, friendly locals and low cost of living make it a hot spot for expats around the world. However, it is the opposite to the UK in its attitudes to foreign buyers: The Thai government forbids ANY land to be wholly owned by foreigners. Buyers after Thai land are left with two options: purchase a 30-year leasehold or obtain a freehold through a limited company.
What’s available according to JustLanded.com and SiamLegal.com
- The New Thailand Condominium Act of 2008 was designed to promote buyers’ protection and strictly forbids foreigners from owning more than 49% of Thai land.
- Apartments and condos can be owned by individuals at 49%. For other types of property, a company can be set up to house it, provided a Thai owns over 50 percent of the company.
- While freeholds are only available to overseas buyers at the above limitation, full leaseholds can be obtained by non-Thai citizens for a maximum of 30 years.
- Whether you buy directly from a developer or an agent, you’re likely to pay the same.
- In Thailand, the seller will often write the contracts for you to sign, but it’s prudent to have a local lawyer comb through it first.
- Property financing for foreigners in Thailand was virtually unheard of until recently. Even as the banks begin lending to non-citizens, there are strict terms and conditions you must abide by.
- Because local lending is both difficult and rare, buyers are known to borrow from their domestic bank and send the money via a currency exchange specialist. OFX transfers over 50 global currencies around the world, including; Thai Baht, Hong Kong Dollar, Philippine Peso and Vietnamese Dong. Check out our full list of available currencies here.
Beware of:
- Property history. The Land Department holds all records of a property’s title deed – examine this closely before entering into talks.
Every year thousands of people trust OFX to help bring their property dreams to life by keeping transfer costs down and sending money securely around the world. With our global reach, 24/7 customer service and dedicated offices across Australia, New Zealand, the UK, Canada and the US we can help you find peace of mind in your little piece of heaven. When it matters, OFX it.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
