Investing in Australian real estate has long been an attractive proposition for Singaporeans. Australia’s proximity to Singapore, growing economy, stable government and political climate, and transparent laws make it an ideal investment haven. The country also offers high residential property rental yields and steady capital appreciation over time.

Australia offers these advantages to Singaporean residential real estate investors while carrying relatively less risk compared with other markets in the region. A look at a 25-year history of residential real estate prices in Singapore and Australia shows both enjoying a similar long-term upward trend.¹   

View the trend here.

Australian residential real estate prices are also less volatile given the country’s significantly larger population and more diversified economy gifted with enormous natural resources. 

Furthermore, Australia faces a long-term housing shortage as homebuilding falls to its lowest in more than a decade in 2024. By 2027, the shortage is estimated to reach 175,000 homes, putting upward pressure on real estate values and rents. Singaporean investors seeking to diversify into overseas real estate are therefore right to look at Australia.

Singaporeans now make up the fifth largest group of investors in Australia. When it comes to real estate, Singaporean investors rank fourth below only buyers from China, Vietnam, and Hong Kong. 

Types of Australian Residential Property Singaporeans Can Purchase

Australia is one of the most well-developed and accessible real estate markets in the world. However, due to the desire of the government to ensure that local residents and citizens have a better shot at home ownership, certain limitations have been placed on foreign buyers of residential real estate by the country’s Foreign Investment Regulatory Board (FIRB).

Every foreign national looking to purchase residential property in Australia must first inform the FIRB, which has the final say in whether the buyer is qualified to own a particular property. 

In particular, foreign nationals are allowed to own new dwellings, that is, property that has been developed and not yet lived in. They are also allowed to purchase vacant land under the condition the construction on the land will be completed within 4 years.²

Foreign nationals are not allowed to purchase established or existing dwellings unless certain criteria are met. These include foreigners who are classified as temporary residents and intend to use the property only for the duration of their stay in Australia, as well as foreign individuals or firms planning to redevelop existing dwellings that will increase the nation’s housing supply.

In April 2023, the Federal Government of Australia cut by half the withholding tax rate (from 30% to 15%) on managed investment trusts (MIT) relating to newly constructed residential build-to-rent projects after 1 July 2024. Singaporean investors in these types of MITs qualify for the reduced withholding tax rate on distributions.³⁴

Finally, foreign-controlled companies may also own established dwellings if the intention is to house their Australian-based staff. The FIRC examines these purchases on a case-by-case basis.

Taxes Involved in Foreign Ownership of Real Estate in Australia

Taxes are an unavoidable part of doing business in any country. Real estate ownership, whether buying or selling, is often subject to a range of taxes that can have a material impact on expected future returns. Therefore, understanding a country’s tax system is a crucial step to investing in its real estate market.

Upon purchase of residential real estate, foreign investors are levied a one-time stamp duty that ranges between 4% and 5% depending on which state they acquire the property. This is a hefty initial tax that investors need to take into account when assessing any real estate purchase.

Foreign investors are also levied a Foreign Ownership Surcharge that ranges between 0.75% and 7%⁵, depending on which state the property is acquired. South Australia, for instance, charges 7% as a one-time foreign ownership surcharge based on the value of the buyer’s interest in the property. Those owning residential real estate in the Australian Capital Territory (ACT) are required to pay a 0.75% surcharge per year.⁶ 

Upon the sale of residential real estate, foreign investors in Australia are subject to a Capital Gains Tax based on the difference between the purchase and selling price. The difference is included as income on the investor’s tax return for the financial year that the transaction occurs. These taxes can reach as high as 45% on income exceeding A$180,000.

Due to the pressing shortage of available homes in the market, foreign investors in residential real estate are also encouraged to rent out their property through a Vacancy Fee. Dwellings that are not occupied are levied A$2,200 per 183 days of vacancy. 

The Vacancy Fee can be waived if the owner or their relatives use the property as their primary dwelling. An exemption is also granted in cases when the property is used for business, is under construction or renovation, or if the property is being rented out on a short-term basis.⁷ 

Australia’s Residential Real Estate Market is Suited for Long-Term Investors

The Australian residential real estate market has grown steadily over the past 25 years, with the property index rising 156% over this period compared with a 100% increase in Singapore’s residential property price index. This performance can be attributed to Australia’s strong resource-based economy, large population, and transparent taxation system. 

Singaporean investors looking to purchase residential real estate in Australia must obtain the approval of the Foreign Investment Regulatory Board. It is easier to purchase newly-built residential real estate instead of existing dwellings, which are limited to citizens, permanent residents, and temporary residents working in the country.

There are high taxes associated with the purchase, ownership, and sale of residential real estate in Australia. These are meant to discourage speculation and encourage long-term ownership. Since certain taxes can result in significant annual costs, it is recommended that Singaporean investors seek out residential real estate in states that impose lower taxes and that they intend to rent out to avoid costly Vacancy Fees.

Browse our Australian properties here and other international properties here.

^[1]https://fred.stlouisfed.org/series/QAUR628BIS#
^[2]https://foreigninvestment.gov.au/guidance/types-investments/residential-land
^[3]https://www.savills.co.uk/insight-and-opinion/savills-news/347634-0/australia-s-mit-tax-reform-makes-way-for-international-investors-in-build-to-rent-sector
^[4]https://www.claytonutz.com/insights/2023/may/long-awaited-tax-changes-to-propel-build-to-rent-investment-in-australia
^[5]https://www.revenuesa.sa.gov.au/stampduty/FOS
^[6]https://www.revenue.act.gov.au/land-tax/foreign-ownership-surcharge#:~:text=If you're a foreign,your principal place of residence.
^[7]https://www.odintax.com/resources/annual-vacancy-fee-for-foreign-owners/