With the unrest in Europe, many Australian expats are looking to return to Australia. Expats who are seeking to buy a residence in Australia though are finding that tougher lending guidelines are a restriction. However, expats with Australian rental property may be better off.
Australian lending clampdowns
The Australian Prudential Lending Authority (APRA) has increased the lending criteria of Australian banks to minimise any financial risk. APRA’s reasoning is that they don’t wish to see Australian banks experience the same as their American counterparts, where major banks struggled to keep afloat during the Global Financial Crisis (GFC).
New lending guidelines expats face include a 10% reduction in the minimum loan-to-value ratio, which typically sits at 80% for most Australian borrowers. However, expats will need to find a minimum deposit of 30% to buy a property. Some lenders are even requesting more, with a 40% deposit payable.
How expats with Australian investment property can avoid issues
Many Australian expats are investment conscious, as such a high number elect to rent out their homes in Australia when they leave, or they have purchased other property, which they lease. In many cases, expat investment property is negative geared, so that it incurs losses and can be used to reduce the amount of tax payable on an expat’s Australian tax return.
The good news for expats with Australian investment property is that they may be able to use these assets as security when they return to Australia to buy a residence. Of course, this depends on the amount of equity that they have built-up in an investment property and the number of properties that they own.
The general rule when applying for a home loan with a bank is the greater the equity held in property offered as security, the lower the deposit required. In some instances, this may reduce a deposit to nil. However, this does depend on the level of security offered to the bank.
To find out more about avoiding property buying hurdles, contact Expat Tax. As Australian chartered accountants, who are expats, we specialise in lodging Australian tax returns for expats. Therefore, we understand the complex tax issues expats face first-hand. We also offer expats valuable tax advice that saves time, effort and money. Don’t pay more tax than you have to!