Australia: Overview

RENTAL YIELDS

5.85% for 120-sq.m. apartment in Sydney

Gross rental income for Sydney apartments are increasing and are now reaching up to 6.96% for small units of 50 sq. m. Yields average around 5.65% .

Average cost of apartments is US$7,690 per sq. m. The cost of 150 sq. m. apartments, and larger, is around US$1,454,000, or US$9,693 per sq. m.

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TAXES AND COSTS

Taxes are high in Australia

Effective Tax Rate on Rental Income
Monthly Income	US$1,500
Tax Rate	11.63%
Click here to see a worked example
Source: Disclaimer

Rental income: Depending on the owner’s net taxable income, the tax rates range from 29% – 47%. An owner may also be required to pay a land tax annually, depending on which state his property is located and on what type his property is.

Capital Gains: Individuals are subject to a 50% reduction of the taxable gain if the asset is held for at least 12 months. Capital gains follow the individual income tax rates at rates from 29% to 47%.

Inheritance: There are no direct taxes on inheritance.

Residents: Residents are taxed at a progressive rate on their annual income, and are required to pay a 1.5% Medicare levy.

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BUYING GUIDE

Buying costs are moderate in Australia

Roundtrip transactions costs are 7% to 12% of the property value. Stamp duty on property transfers ranges from 1.5% – 6.75%, and is paid by the buyer. It takes about 10 – 11 days to complete the five procedures needed to register a property.

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LANDLORD AND TENANT

Tenancy laws are neutral in Australia

Australia ’s landlord and tenant laws are generally neutral. Both parties’ rights are well-protected by each states’ Residential Tenancy Act.

Rents: Rents can be freely negotiated, but increases are subject to review by a Tribunal provided the tenant makes an application. The rent cannot be increased before the end of the first year of tenancy in any state.

Tenant Eviction: A landlord can terminate a tenancy by giving notice in the approved form, or by using the tribunal. The legal system is highly efficient: it takes an average of 44 days to evict a tenant.

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ECONOMIC GROWTH

Strong economic growth continues

The Commonwealth of Australia is one of the world’s most thriving and progressive countries. The Australian economy which has achieved uninterrupted economic growth from 1992 to 2007, growing by 3.6% on average. Investments in the resources sector continue to rise, as businesses gear up to meet rising demand, driven by accelerating growth in China.

Monetary policy has been recently tightened, lifting the standard variable mortgage rate. From 8.70% in January 2008, it was adjusted in early March by 30 basis points to 9%. Average mortgage interest rates for 3-year fixed hasve also been rising, and in February 2008 were at 13.60%. The Reserve Bank projects inflation rate to reach 3.5% this year compared to 2007’s 2.2%, which means that official rates are likely to move yet higher.

Unemployment was 4.58% in 2007, and population growth was, 1.5% driven by high net overseas migration of 177,600 persons.

Australia is one of the world’s least densely inhabited countries, with scarcely two people per square kilometer. This vast country, big enough to be considered a continent, houses a mere 21 million people of various nationalities. However, more than 75% of the population lives in urban areas, with more than 13 million (65%) living in the eight capital cities.