Overseas property investment may appeal to the savvy investor looking to diversify their property portfolio, however, the risks of investing overseas are far greater than investing in property in Australia.
Investors looking to purchase overseas must know the local property market and understand the risks involved. Purchasing abroad requires independent research as not all property markets are created equal. Here are some things to consider before investing overseas:
Changes in the exchange rate can affect the amount of rental income you receive. If you borrow money in the foreign country and the Australian dollar drops you can potentially pay higher holding costs on the property.
Purchasing property unseen poses a big risk. Renovations and ongoing repairs may be required and maintenance will not be as straightforward when you are far away from the property.
The arrangements between the Australian tax system and that of another country is very specific and complex. Australian residents are taxed on worldwide income. Therefore, capital gains tax applies when you sell, or dispose of, real estate both in Australia and overseas. Local property taxes are also applicable on the rental income or capital gain from rental properties situated in that country.