For Australian investors, the domestic market is strong, but not exactly appealing for those looking for a high return on investment in the long run. With the increasing strength of the Australian dollars over the past years, many Aussies are looking for opportunities to invest. The relative resilience of the economy (and real estate market) at home, however, have made many shy away from such investments. Property prices in large Australian cities like Melbourne and Sydney are soaring, and many are unwilling to bet that with prices lingering around historic highs, they will continue on a dramatic rise far into the future. As such, many Australians are looking offshore.
What are some of the benefits of investing overseas? For starters, no property market is 100% stable, as recent global events have witnessed. Spreading one’s assets throughout different countries, and more importantly currencies, means that when one is down there is still a chance the other will be up. One of the most appealing areas to Australian investors in recent years has been the UK for exactly this reason. While the property market in the UK has seen prices drop, they haven’t been hit as hard as the Americans, who many believe may see things worsen still before any sign of improvement. Conversely, the UK is still home to a number of exciting cash flow positive investments from apartment blocks to individual units, businesses, holiday homes and even student housing projects. The danger is investing sight unseen. Consider travel between locations to be a part of the overall cost, unless you are very comfortable working with an overseas agent with whom a trusting relationship has been established over time.
The real barrier, then for Australians looking to invest in the UK is not that of the available capital, it is that of knowing where to begin. Any serious investor knows that time is of the essence, but an investment made in haste will amount to a loss with time. While rental units in the UK may seem initially extremely lucrative, the reality is that many of the costs are unforeseen to Australians who have different rental laws, different sets of tenants rights, and different tax structures. It is best to consult with a financial professional and property specialist in the UK market (or one in the same) which even at a cost, will save you from losing money in the long run.
The other important factor to consider is that it is highly unlikely that the average Australian would be granted financing by a UK financial institution. Therefore, an investment in the UK will not have the usual rent-it-until-you-own-it finance model. Often, those purchasing a property in the UK are using domestic investments to leverage the ROI, meaning the tax and legal implications are far beyond what the average amateur property investor is able to maintain. Good opportunities exist for those with dual citizenship between Australia and the UK, and those who have spent enough time living in the UK to seek permanent residence.