Invest
Why foreign property investment could be a ‘perilous exercise’
Half of Aussies would consider foreign property investment if it had an appealing price point, but this could be a bad idea, a property research house has warned.
Why foreign property investment could be a ‘perilous exercise’
Half of Aussies would consider foreign property investment if it had an appealing price point, but this could be a bad idea, a property research house has warned.
RiskWise Property Research chief executive Doron Peleg has told property investors to be aware of the significant hazards that accompany overseas property investment.
His warning coincides with research from money transfer group WorldFirst, finding half of Australians would consider investing in international property if it was cheaper than Australian property.
“While it may seem like a good idea at the time, investing overseas is quite a perilous exercise mainly because, unless you know the place or have family living in the country, you don’t know the local market, especially from a demand perspective,” Mr Peleg said.
“It’s only the local people who know if an area is really popular and has high demand or vice versa.”
Continuing, Mr Peleg said the Australian property market is generally highly regulated when it comes to valuations. These buyer protections may not exist in other countries and buyers’ understanding of fair market value is also compromised in international markets.
“Even here there are blacklisted areas where lenders require more deposit and they will also tell you if it is high risk,” he said.
“But overseas you won’t know any of this, not the supply and demand factors, not the demographics of the area and not whether good tenants are available.”
I still want to invest overseas, help me out?
Mr Peleg’s advice for those committed to foreign property investment is to become familiarised with the market, laws and regulations of the country and region in question.
Investors should also be aware of how they would recoup losses in the event of a tenant’s failure to pay rent.
Additionally, he noted that developers in some instances hold the property management company, and as such are not fully independent.
With this in mind, Mr Peleg said, “Often they offer a rental guarantee for a certain period, so you will be convinced the property generates good rental return and therefore its market value is higher. However, the person who pays for the rental guarantee is the investor.
“In addition, in Australia you know with an existing property the commission the agent receives is about 2 per cent and for off-the-plan maybe between 4-6 per cent.
“However, overseas in an unknown market you don’t know what the commission is and the person who ultimately pays is you and, in some cases, it could be 10 per cent or even more commission to the seller.”
He said the only exception is if an investor is purchasing with good advice from close friends or family who live in the area.
However, even this safety net may not be good enough, he added.
“RiskWise’s advice to investors is if they must purchase overseas, to at least try to stick with existing properties as opposed to off-the-plan, which carry a lot higher risk especially if there is a danger of oversupply in the area,” Mr Peleg said.
RELATED ARTICLES
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Twice the demand: the case study behind Melbourne’s first‑home buyer surge
Melbourne has quietly engineered one of Australia’s most consequential housing turnarounds, with first‑home buyer demand running at roughly double the national pace and four of the top five buyer ...Read more
Property
First‑home buyers now anchor Australia’s mortgage growth — but the risk maths is changing
Great Southern Bank’s revelation that nearly one in three of its new mortgages went to first‑home buyers is not an outlier. It is the leading edge of a broader market realignment powered by government ...Read more
