Expats snap up trophy properties as dollar and prices fall

Cashed-up expatriates are making the most of the falling Australian dollar and weakening property prices to snap up trophy properties in prestige postcodes costing upwards of $5 million.

Buyer's agents advising overseas clients claim the dollar pushing below 75¢ to the US dollar is fuelling much interest among the Australian expat communities of Singapore and Hong Kong, where the dollar is pegged to the greenback.

Many are returning to Australia permanently, some are buying locally in anticipation of a future return and others are setting up a family home with the main breadwinner commuting back to their Asian workplace.

Britain's departure from the European Union is also prompting many Australians who work in London to reconsider their options, including buying local property as a future bolthole.

Emma Bloom, a director of Morrell and Koren, says many expats fear the Australian property market could become even more competitive and expensive because of record low interest rates and high immigration.

"They are super nervous about the tide going out and being left with nothing," she says. "They fear not having anywhere to live if they don't buy now."

Sarah and Geoff Grace and their children (Isabella, four, and Olivia, two) are Australian expatriates living in Happy Valley, which is located on Hong Kong Island and famous for its race course.

The family, who live on the 10th floor of a residential high rise, bought a five-bedroom house in East Brighton, about 12 km southeast of Melbourne, for their eventual return to Australia.

Low tax rates

Hong Kong and Singapore are popular destinations for Australians because tax rates are low enough to save, despite the high cost of living.

Geoff, an insurance broker, says the falling Aussie dollar and weakening property prices are creating a lot of interest among the local expat community about buying property back in Australia.

Hong Kong's top tax rate is 17 per cent, there are no capital gains and most employers give end-of-year bonuses that cover the income tax bill.

"Colleagues and friends have also bought, or are in the process of buying," Geoff says. The plan is to return when their eldest child is old enough to go to school.

Other Australians are heading off to countries offering high salaries and low taxes in a bid to save for their future Australian homes.

Former federal treasurer Peter Costello says loss of the nation's "best and brightest" to lower tax rate regimes will continue until Australia becomes more competitive.

Mal James, a buyer's agent with James Buyer Advocates, says expat demand is strongest from A-grade buyers with upwards of $5 million who do not have to borrow from lenders imposing increasingly tougher terms and conditions. He adds: "It's strongest where the banks are not involved."

Potential competition from non-Australian overseas' buyers has been reduced by states imposing residential foreign buyer taxes of up to 7 per cent in addition to a freeze on lending from domestic banks.

"A lot are paying cash," adds Bloom.

Rich Harvey, chief executive of propertybuyer.com.au, says he is targeting expats with a $21 million, 600 square metre Sydney apartment with panoramic views of the harbour and Opera House.

"When the dollar slips below 80¢ there is more confidence amongst expat buyers," he says.

More currency downside

Shane Oliver, AMP Capital's head of investment strategy, believes the Australian dollar has "more downside" as the gap widens between the Reserve Bank of Australia's cash rate and US Federal Reserve's funds rate.

Expat buyers are chasing the same level of luxury and convenience of their Asian apartment but wanting the space, gardens and amenities (such as schools) offered in leafy inner suburbs, particularly around Sydney and Melbourne, say buyer's agents.

But changing market conditions mean some considering buying reckon they have more time to make a decision.

Amy Mylius, a buyer's agent with Cate Bakos Property, adds: "Falling property prices in Melbourne and Sydney means there's less urgency for many owner occupiers. In the past few years some buyers saw the market running away from them and felt compelled to act."

Mylius says local banks' tougher borrowing terms and conditions are slowing demand.

Many couples are also buying properties and paying them off while earning higher income and paying lower taxes before their children are old enough for private secondary education in Australia.

Glen Frost, a partner with PricewaterhouseCoopers, warns buyers to be alert to their tax liabilities from rental income earned on an Australian property.

Frost also warns the Australian Taxation Office will check on claims that expats have genuinely become non-residents.

"Going away does not mean you become a non-resident," he warns.

For example, ATO officials will check on whether Australian club memberships are being maintained during expats' time overseas.

"The more (financial) ties you have in Australia, the more likely the ATO will start asking questions," he says.

For more information on financial planning and financial advice for Australian expatriates from Hong Kong or Singapore, please visit our Whole Wealth Expat Page.

This article was published and provided by the Australian Financial Review.


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