Should I Buy My Future Home Before Repatriating..?
For many Australian expats stuck all over the globe, the lockdown measures as a direct result of Covid-19 have caused them to start to re-think their expat plans. For some this could mean shortening their planned time abroad, deciding that the wide open spaces and big backyards of Australia are too appealing to stay away from, or simply that it’s best to be closer to family. Whatever the reason, this has led many Australian expats to consider their plans for buying their future home.
The common Australian expat question we’re looking to explore this week is therefore – “Should I purchase my future home in Australia before I repatriate..?”
There is no ‘one-size-fits-all’ approach to this question, so this week I’m exploring some of the key considerations that Australian expats should be thinking about before jumping into the property market with both feet.
1. Are you prepared to rent out the property while living abroad?
Purchasing a property, particularly the one that you plan to reside in, is typically not a small transaction and requires most to take out a mortgage also. Therefore, it’s important to consider whether you’re happy and prepared to rent out your property and generate income to cover the costs of owning it.
If you have no plans to rent out your property because you simply don’t want anybody else in your future residence, it’s important to consider the holding costs of your property each year. This means what annual running costs you’ll be incurring such as rates, insurance, water, repairs, maintenance and taxes while you’re living abroad. You may find that this can quickly add up to 1 – 2% of your property’s value each year.
2. Where do you expect the property market to go before you return?
It’s important to also consider where you see the property market to head between now and when you intend to return to Australia. And by this, I’m not referring to the Australian property market overall, or even the particular state you’re looking to buy in, but specifically the areas that you’re considering. If you’re expecting that the market will remain soft or even decline further, then this may imply you would be best waiting. However, if you expect that the market may rise, then you may want to at least gain a foothold in the market. This can be particularly true for those properties in great school zones, which seem to consistently perform quite well.
If you’re not sure which direction the property market will head, start speaking with local real estate agents, buyer’s agents, and start doing your own research. There are excellent podcasts such as the Property Couch that provide a ton of great, useful information to increase your own knowledge base.
3. Are there any tax considerations for you to consider?
If you plan on purchasing your property and renting it out at first, this would imply that it is an investment property and the associated tax implications are applied. If this were then to become your main residence, it’s important to consider how this would potentially change its future tax treatment. If you’re planning to return to Australia in the short to medium term (<3 years), this may not be a significant consideration, however I do find it’s often best to consider the tax implications before leaping into any strategy.
4. What are your financing options?
For most Australian expats to consider purchasing their future main residence, a loan of some description will be required. It’s therefore important to speak to your Australian expat mortgage broker to explore your options and ensure that your borrowing capacity is sufficient to purchase the property that you’re after. For most Australian expats, there are no premiums to interest rates or additional charges that are imposed just because we reside offshore, however some lenders will seek to impose these. Therefore, it’s important to do your homework here.
If you’re planning to return to Australia in the short term, you may also want to consider the structure of your financing. While it’s an investment property, you will likely need to consider investor interest rates, whereas once you reside in the property, you may be able to refinance this to an owner-occupier loan, which base on the current rates would create some further savings.
5. Do you have a team to assist with your purchase?
Are you planning to work with a buyer’s agent? Are you simply intending to look online and have your family check out the property once you’ve found something you like? Are you not intending to have anyone check out the property? There is no right answer here, and it comes down to our personal preferences and of course, what options are possible. There are many excellent buyer’s agents and property advisers in the marketplace that can add value, and also independent valuation experts who can value a property once you’ve found one.
When it comes to buying your future home, I would always prefer to at least have an independent valuation carried out and the relevant inspections to ensure that I’m not buying a dud.
6. Will your tastes and preferences change by the time you return?
A common approach for many Australian expats who return home is to rent in a particular area for 6 – 12 months to get a ‘feel’ for it and assess whether they actually want to stay in the area before committing to a purchase. This is not the right approach for all, as many expats know exactly where they want to reside from previous experience or otherwise, and have no desire to rent at all.
There are many considerations when it comes to considering purchasing your future residence while an Australian expat. As always, seek professional advice, and ensure that you’ve done your homework before diving in.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.
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