Australia: Guide to Buying Costs and Procedures

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Buying costs are moderate in Australia

How high are realtors’ and lawyers’ fees in Australia? What about other property purchase costs?

How difficult is the property purchase process in Australia?

The policy of the Government of the Commonwealth of Australia in regards to residential real estate is an inward-looking, conservative one, to say the least. Acquisition of residential real estate by foreign nationals and corporations is subject to Foreign Investment Review Board (FIRB) approval. FIRB approval is not required by Australian citizens resident abroad, or for acquisitions in residential-zoned properties by foreign nationals holding permanent resident or “special category” visas (i.e. New Zealand citizens), or by foreign nationals purchasing with their Australian spouse as joint tenant.

Priority is given to foreign investment in areas that would directly increase housing stock. Not only would the quantity of the housing stock would be affected, it would also bring benefits to the local construction industry and their suppliers. The wariness of the government on foreign influx in developed residential real estate stems from a desire to avoid excess demand, create greater stability of housing prices as well as encourage the supply of new dwellings that would benefit Australians, whether through ownership or lease.

Since government approval is obligatory in acquiring residential real estate in Australia, it is inadvisable to sign a contract before securing approval from the FIRB, unless the contract allows for a grace period for securing government approval, prior to completion.

Buying property involves the following steps:

1. The seller must secure a title search, plans, easements and covenants recorded in title from the Land and Property Information department. These documents must be attached to the Contract of Sale.
2. The seller should also secure a Zoning Certificate from the Municipal Council as well as Drainage Diagram from the Local Water Authority.
3. The solicitor for the buyer must then prepare a transfer form (given that there are no outstanding interests in the property) for execution of the sale.
4. The contract and transfer form must then be sent to the Office of State Revenue, where it is stamped and duties settled.
5. The transfer form and certificate of title are then sent to the Land and Property Information Department for registration.

Footnote to Transaction Costs Table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Stamp Duty:
Stamp duty depends on the value of the property and follows a sliding scale. Stamp duty is paid by the buyer when the contract is sent to Office of State Revenue. If the contract is not stamped within 3 months, an exchange penalty is due on the amount of stamp duty payable at the rate of 12.78% per year.

For easier reference, the Sunday Morning Herald has an online stamp duty calculator.
http://www.smh.com.au/business/money/tools/tax/stampduty.html

Stamp duty on property transfers varies by State, thus:

Land Transfer Registration Fee:
Paid to the Land Titles Office (in NSW and NT), this fee is for the transfer of ownership to the buyer. It varies from state to state, with certain states imposing a fixed fee while others impose a variable fee based on the purchase price. The solicitor or conveyancer typically pays this on behalf.of the buyer. The registration fee is paid to the Department of Natural Resources in Queensland or Department of Land Administration in Western Australia.

In New South Wales, registration fee is AU$75 regardless of size or value of property. In South Australia, registration fee for properties worth above AU$40,000 is AU$194 plus 0.6% of value above AU$50,000.

Property Conveyance Fee:
Solicitor’s or Conveyancer’s fees are paid for the documentation necessary for a property purchase. Property conveyance can be done by a solicitor (lawyer), a conveyancer (a land broker, land agent or settlement agent), or even the buyer and the seller. In the Canberra, Queensland and Tasmania, solicitors have a monopoly on conveyance, while in Victoria a conveyancer must work with a solicitor. In other states, the parties are free to choose.

Solicitor's fee are generally negotiable and can be a fixed amount, an hourly rate (with or without ceiling), or a percentage of the property value (typically around 1% to 2%). GST is always paid, thus, it is worth asking if the fixed fee is already inclusive of the GST.

Some lenders provide property conveyance as a free service to borrowers. Separate conveyance fees are usually paid by both the buyer and the seller (in some states the buyer’s costs are higher, as there’s more work involved).

Realtor's Fee:
Except for Queensland, real estate agent's fee is negotiable in all states.

Agent's commission in Queensland is set by the government at a maximum of 5% of the first AU$18,000 of the sale price and 2.5% of the balance of the sale price (plus 10% GST).

In Tasmania, agent's fee is freely negotiable, nevertheless, the Real Estate Institute of Tasmania recommends the schedule below (inclusive of GST, as of July 2007).

Australia - more data and information

• How landlord-friendly is the law in Australia?

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posted by Kevin Davies | 2008-06-03

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