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Beginner’s Guide To Buying Property In Melbourne

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Buying your first property is already hard enough, what more buying your first property overseas, even in a country that most Malaysians are familiar with such as Australia? By William Lee

The truth is that the purchase process is actually easier than most people think, with many misconceptions about how it is done circling among would-be investors, putting them off what could be a very good long term investment.

Although the rules and regulations are similar across most of the states in Australia, there are some special state concessions when it comes to buying in the state of Victoria, where Melbourne is located.

Why Melbourne?
The Economist runs a yearly survey which asks a series of questions to rate the liveability of all of the major cities in the world. For the past 4 years running (2011-2014), Melbourne has been voted the “World’s Most Liveable City”.

The survey ranks such things as access to education, healthcare, infrastructure, culture and security amongst other things, making Melbourne a very popular destination for people to go and work.

This has made Melbourne the fastest growing city in Australia with a population increase of over 10% from 2012-2013, with some locations around the CBD growing at 15%. They have also surpassed Sydney’s growth rate over the last decade.

Statistics from the department of immigration shows that over 65,000 new residents moved into the state of Victoria in 2011-2012 alone, many of which would have decided to live in Melbourne city.

Historical Performance

The performance of any suburb in Melbourne is public knowledge and is tracked by the Real Estate Institute of Victoria (REIV), fully available on their website.

As you can see in the image above, the capital appreciation over the past 10 years has been a steady 7% for apartments and 8% for landed properties. Rental yields are also tracked by the REIV and range between 4 – 5.6% depending on location and unit type.

The Purchase Process
There are a lot of misconceptions about buying property in Australia, such as foreigners can’t buy property (false) and that they also don’t qualify for Australian banks loans (also false), but the actual purchase process is relatively simple, which you can see below.

Booking a Unit
Most real estate agencies will take a booking fee ranging from RM5000-RM10,000 to ‘book’ your unit from the developer. This amount is sometimes refunded to you upon your contract being confirmed (also known as an ‘unconditional contract’) or is offset from the deposit amount.

Issuance of Contract
Once the booking fee is paid, a contract will be issued to you. You will need to sign at least 2 or 3 copies of this contract, keeping one for yourself. The other contracts will be sent to the developer’s lawyer for processing.

Deposit Paid
After booking the unit, you would typically have 1 week to transfer the funds to the developer’s trust account. The amount for new units is 10% and cannot be used in any way by the developer as per Australian regulations, this protects the buyer’s interests so if anything were to happen to the developer, the funds would be returned back to them.

Exchange of Contracts
While processing payment, the contracts are usually on their way to the developer’s lawyer, sending of contracts can be left to your real estate agency to do as they will bear the costs of shipping or charge it back to the developer.

Apply for FIRB
FIRB stands for Foreign Investment Review Board and is a government department that makes sure foreign investors are investing in only property they are allowed to. For example, foreigners can’t purchase sub sale properties, so if the FIRB find out that they have, then they can take action through fines and sanctions.

Pre Settlement
Several months before you have to settle on the property, you will be notified by the developer’s representative to prepare for settlement. At this point you should have started applying for loans to make sure that they are approved in time for settlement.

Most clients would be guided by their conveyancer or solicitor on the amount you would need to remit to the developer.

Inspection
A pre settlement inspection is carried out prior to settling on the property, which you may opt to personally inspect or use your property management company to represent you. They will check for defects and notify the developer for you. Some property managers will record a video walk-through of your apartment for your reference.

Settlement
At this point you have to settle the outstanding amount on the property, which will be the stamp duty plus the difference between the loan amount and the 10% deposit you sent to them at the start of the process. For example if you have an 80% loan, your outstanding payment would be [stamp duty + loan amount (from bank) + 10% of the property price].

Interest rates in Australia are at all-time lows, so we encourage our clients to apply for Australian dollar loans when possible.

Receive Keys
Once settlement is done, the keys will be passed to you or if you have engaged the services of the property manager, then they will take the keys from you to pass to any future tenants.

William is the Director of Sales for Austral Property, which helps their clients purchase Australian properties from Malaysia guiding them through every stage of the purchase process to make it as hassle-free as possible. You can contact him at william.lee@australproperty.com or visit their website www.AustralProperty.com for more information.