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Investing
4 steps to buying your international dream home
Fiona Harris - December 4, 2008
 A search for your dream international property on the Internet makes buying it seem like a walk in the park.
Companies such as Homehunts.com which specialises in locating luxury properties in France, Portugal, USA, Morocco and Dubai partner with real estate agents all over the world to offer prospective buyers an array of properties and locations.
And as is often the case, the service is free. Too easy.
But step out of cyber world, and the reality sets in.
While most Australian banks can assist you with finance in areas where they have international representation, in most cases loans are taken out in the currency where the property is located.
So exchange rates are going to be important.
Further, investors are not able to use their Australian property as security for the loan unless the issuing foreign bank has bank status in Australia.
Here are some key tips to navigate your way through the key issues.
1. Know your budget
It’s easy to forget the incidental costs around buying a property, particularly if you are dealing with foreign currency and language.
But they do add up. According to one of the major UK property portals propertyfinder.com, buyers looking in France should budget for 9-13% of the purchase price in costs such as transfer fees, notary fees (see below), transfer fees and property registration fees.
2. Understand a unique buying process
The rules of engagement are different all around the world. In France for example, a ‘notary’ or government official is an essential part of the sale process.
After a sale has been negotiated, it is the notary who prepares the initial legal contract. Once signed by both parties, the buyer pays a 10 per cent deposit, with the balance due on completion.
3. What do you actually own?
In cities like New York, there is no such thing as a standard apartment. For example, do you understand the difference between a condominium and a cooperative?
In a cooperative, the owner is subject to approval by a board of directors who are basically responsible for the management of the building. This board can set limits on the amount of money used to finance your apartment, as well as make restrictions on sub-letting.
Also, you are not able to sell a cooperative without the board's approval of the prospective buyer. Now that’s worth knowing about.
4. Taxing matters
Deloitte’s head of international tax services, Sally Moreton says there are two issues when buying an international property – the tax consequences in Australian and what happens where the property is located.
“As a general rule, taxing rules will apply where the property is located so a tax return will probably need to be filed in that country.”
Moreton says other factors that affect how the property will be taxed include what is regarded as deductible expenses, the depreciation of assets and how this is calculated, withholding requirements as well as value added taxes such as GST.
Around these, there are some other quirky ones. For example in France Moreton says estate taxes can be “funny”. Issues like whether you need a will lodged in that country in the event of death is a bit unclear
And of course there is the issue of capital gains tax. According to the ATO, generally you will be taxed on any capital gain you make when you sell your international dream home.
More articles from this edition of CompareShares:
Expert Investor: Take a look at what Bob Jane owns as the car industry hits the wall
Property: Top 10 places in the world for real estate
Property: 4 steps to buying your international dream home
Analysis: UK's relief for homeowners a step in the right direction
Forex: Why Fed rate cut expectations have lost their impact
Companies: Babcock & Brown shares double on ASX
Rates: NZ central bank makes record rate cut
Commodities: Oil prices have no floor: OPEC
Companies: Google tightening its belt
Forex: China currency issue heats up
Companies: Billabong downgrades full year guidance
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