The Australian real estate market is known for its robust regulations, high transparency, and strong protection of personal property, which is considered sacred and inviolable. These characteristics make Australian properties an attractive asset for wealthy individuals worldwide, and investing in Australian real estate has long been popular among Hong Kong residents.
Anyone can buy property in Australia, including Hong Kong residents, who enjoy permanent ownership (with the exception of the capital, Canberra), and there are no restrictions on how many properties one can purchase. However, many people are uncertain about whether to buy new or second-hand properties. This article compares these two options from a policy and regulatory perspective to help investors make informed decisions.
1. Are New Properties More Expensive Than Second-Hand Properties in Australia?
There is a common misconception about buying property in Australia: many people believe that new properties are more expensive than second-hand ones, leading locals to prefer second-hand properties while foreigners can only buy new ones. This is actually a misunderstanding.
Firstly, many people are unaware that locals in Australia also prefer buying new properties, and the Australian government encourages its residents to do so. Various state governments offer a range of subsidies and incentives for new property purchases. For instance, buyers can benefit from stamp duty exemptions, new home grants, and building subsidies. In 2021, some state governments introduced the "New Home Guarantee Scheme," allowing local buyers to purchase new properties with just a 5% down payment.
Secondly, new properties in Australia are not necessarily more expensive than second-hand ones. The market price for new properties is transparent, with little room for markups. On the other hand, the second-hand property market is different. Buyers at auctions may be influenced by the atmosphere and make impulsive decisions, often paying far above the market average for second-hand properties. Due to this high markup, even if the Australian property market rises significantly, these properties may take longer to appreciate in value.
Thirdly, this does not mean that new property prices are always lower. In fact, when comparing new and second-hand properties of the same type in the same area, new properties are usually more expensive. This is because new homes typically use more modern construction techniques and materials, resulting in higher quality, which naturally raises their prices.
2. Do Foreigners Have to Buy New Properties in Australia?
Foreigners in Australia are generally only allowed to purchase new properties, but there are exceptions depending on the type of visa. Specifically:
Pure Overseas Buyers Can Only Buy New PropertiesPure overseas buyers are those who do not reside in Australia or do not hold any Australian visa, specifically those with visas valid for less than 12 months, such as tourist visas.
Temporary Residents May Purchase One Second-Hand Property for Self-UseTemporary residents with long-term visas (allowing them to stay legally in Australia for more than 12 months) are recognized as Australian temporary residents. They can purchase one second-hand property for self-use, which means the property must be their primary residence in Australia.
However, there are many restrictions for temporary residents buying second-hand properties:
They must sell the property within three months of their visa expiring or leaving the country.
They need to apply for Foreign Investment Review Board (FIRB) approval, with application fees varying based on property price (AUD 13,200 for properties under AUD 1 million).
They cannot rent out or sublet the property; doing so would violate FIRB regulations. The property must be vacant and not occupied by anyone at the time of sale.
3. Legal Differences for Foreigners Buying New vs. Second-Hand Properties in Australia
Generally, new properties and off-plan properties in Australia are sold at fixed prices, while second-hand properties are often sold via bidding or auction, with the highest bidder winning. Additionally, if a foreign buyer submits an FIRB application to purchase a second-hand property but fails to secure the property, the FIRB application fee is non-refundable.
Buying second-hand properties at auctions in Australia also comes with risks. For instance, the FIRB approval letter may specify a maximum purchase price. If the final auction price exceeds this amount, additional costs may apply. Therefore, foreign buyers need to be well-prepared and knowledgeable when buying second-hand properties.
As mentioned earlier, foreign buyers must use second-hand properties for self-occupancy purposes, cannot rent or sublet them, and must sell them within three months of their visa expiring. If they rush to sell during a market downturn, they may incur losses. Moreover, if they continue to hold the property after their visa expires, it is considered illegal, and penalties can include fines up to AUD 127,500 or three years of imprisonment, plus an additional penalty of 25% of the property purchase price.
4. Australian Stamp Duty Rates for 2023
Stamp duty rates and regulations vary across Australian states and territories. Generally, the stamp duty cost is determined by the property's taxable value. The lower the property value, the lower the stamp duty bracket, and the less tax the buyer has to pay.
Stamp duty is calculated using a progressive rate, with the percentage increasing as the property's value rises. The general rule is that the cheaper the property, the less tax is paid.
Here is an overview of the 2023 stamp duty rates for different states and territories in Australia:
Victoria: First-time home buyers (only available to Australian citizens and permanent residents) purchasing properties under AUD 600,000 are exempt from stamp duty. For properties between AUD 600,000 and AUD 750,000, there are partial exemptions. For non-first-time buyers, properties between AUD 250,000 and AUD 12 million have stamp duty rates ranging from 1.5% to 5.5%.
New South Wales: First-time buyers are exempt from stamp duty on properties under AUD 650,000. For properties between AUD 650,000 and AUD 800,000, there are partial exemptions. For non-first-time buyers, properties between AUD 140,000 and AUD 4 million have stamp duty rates ranging from 1.5% to 5.5%.
Queensland: First-time buyers (only available to Australian citizens and permanent residents) purchasing properties under AUD 550,000 are exempt from stamp duty. For non-first-time buyers, properties between AUD 55,000 and AUD 11 million have stamp duty rates ranging from 1.5% to 5.75%.
Western Australia: First-time buyers (only available to Australian citizens and permanent residents) purchasing properties under AUD 430,000 are exempt from stamp duty. For properties between AUD 430,000 and AUD 530,000, there are discounts. For non-first-time buyers, properties between AUD 80,000 and AUD 30 million have stamp duty rates ranging from 1.9% to 5.15%.
South Australia: Properties between AUD 150,000 and AUD 50 million have stamp duty rates ranging from 1.5% to 5.5%.
Northern Territory: Until June 30, 2023, buyers of land or second-hand properties valued at less than AUD 650,000 who live in the property for more than six months can apply for stamp duty exemptions.
It's important to note that the above information is for reference only. Specific stamp duty rates and regulations may change annually or vary by region.
In addition, foreign buyers in Australia are typically required to pay an additional stamp duty surcharge, with specific rates varying by state. Buyers should consult professional real estate advisors or lawyers for the latest and most accurate information and advice before purchasing property.
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