(Flickr/Eduard Marmet CC BY-SA 2.0)

Investing in an overseas property could put a big dent in your bank account if you overlook the risks. But if done right, you could end up with a comfortable home away from home or a winning investment property at your favourite holiday destination.    

By
Amy Chien-Yu Wang
Published on
Thursday, February 8, 2018 - 14:37
Duration
5 min 12 sec

As chair of the Property Investment Professionals of Australia, Ben Kingsley often gets asked about overseas investment. It’s something he cautions against due to the long list of things that could go wrong for buyers operating in an unfamiliar territory.

And appealing price tags can often come with surprising hidden costs.

“The main challenges we see are usually around the way, in which, properties are managed in different countries, in terms of property management and professional property management. So, I use America as a perfect example, where there’s no formal regulation around property management; so, in terms of tenancy, possession, moving on, unyielding tenants - those types of things are really really challenging, and here you are based in Australia, and you gotta try handle all these events. So, it could result in an expensive air ticket to go and sort out this mess.”

And appealing price tags can often come with surprising hidden costs.

“There are some risks around currency risk, so, a lot of people are attracted when our dollar is really high, but our dollar goes a long way in terms of being able to buy that, but it could also affect you the other way around, so if the dollar was low, and you try to buy offshore, it’ll cost you more not only to hold that, it’s great to get the foreign income coming in, but then, the maintenance, the upkeep of the property, and all of that is potentially being paid with the Australian dollar and it could be a little bit lower.”

Finding the right person to look after the property is a major hurdle to overcome.

“It’s ok if you’re from a country where that’s your original origins, and you've got maybe friends and family and professional networks that could help you, but if you don't have those types of things, then ultimately you’re at risk of what happens if something goes wrong? What are your contingencies to basically look after the property in those respect?”

John Tripidakis is a lawyer based in both Australia and Greece. His clients mainly buy in Greece for sentimental, leisure, or investment purposes. He advises paying attention to the different ways things operate offshore.

“I would like people to be very cautious and keep in mind that Greece and Australia are different territories, different laws, different legal and tax system. So, do not think according to the way that we do things in Australia – it’s very very different in Greece.”

He recommends finding qualified professionals to outline immediate and annual costs, ways and frequency of communication, right from the start.  

“It could be different from country to country, but in Greece, my main suggestion would be address to professionals: a qualified lawyer, a qualified tax accountants a reliable and trust worthy real estate agent with whom you have very very good recommendations, and preferably, be professionally insured, ask him for his professional insurance coverage, no insurance, well, you should be very cautious with that.”

Tripidakis recommends hiring a lawyer to help you navigate the complicated process of purchasing an overseas property.   

“Many many considerations here that need to be closely taken care of starting from the remittance of the money, the opening of the bank account, the taxation issues, the legal issues, the actual issues, even the investigation where the prices are fair and correct price.”

Everything should be properly documented to avoid miscommunications and to make sure the agent is clear of his or her obligations.

“If his obligations are not upheld and maintained, then you should terminate the relationship as soon as possible, cut the losses.”

Ben Kingsley, on the other hand, prefers to deal with properties in his most familiar territory. He says overseas buyers often choose to invest in Australia due to the well-regulated market despite new taxes such as the NSW government doubling the stamp duty for overseas investors from four to eight per cent, the “ghost tax” for vacant properties, and the removal of capital gains tax exemptions for foreign buyers.

According to Credit Suisse, Chinese buyers accounted for an astonishing 87 per cent of foreign property investment in NSW during the first half of 2017.

“We have licensed estate agents who need to manage properties, we have a tenancy and land lord active in every state so there’s set rules and guidelines in terms of coming into this market, and I think a lot of people also like the fact that we have very stable government and a stable system with low corruption.”