More Indonesians buying Australian property

Sudibyo M. Wiradji, The Jakarta Post, Jakarta

Australia has become one of the favorite destinations for many affluent Indonesians seeking a house or an apartment either for living in or as an investment.

Although many wealthy Indonesians still prefer to buy property in neighboring Singapore or Malaysia, the demand for Australian property from Indonesian buyers has been persistently increasing over the past five years.

Melbourne-based property developer and management company Brady Group attributes the strong demand from Indonesian buyers to the continuing increase in the number of Indonesian students studying in the country.

Midli Christin, the Brady Group's chief representative in Jakarta, said that many Indonesian parents preferred to buy an apartment for the accommodation of their children during their stay in the country, rather than renting.

Besides the regulations imposed on overseas people wishing to buy a house or an apartment in Australia not being so complicated, purchasing a property in this country can constitute a good investment alternative. More importantly, buying an apartment in the country is financially more flexible. Residential property, such as apartments, are sold under a mortgage scheme that allows buyers to pay by installment over a period of up to 30 years.

"The monthly mortgage repayments on an apartment are almost the same as the rent for the property. This is the reason why buying an apartment is preferable," Midli said.

By owning a residential property, the parent will not have to worry about finding another apartment to rent when another son, daughter or relative is in Australia for study purposes, she said.

Under the regulations, however, foreign nationals are not allowed to buy a second-hand residential property. They are allowed only to buy a new apartment unit or a brand new home that has not been previously sold or occupied, and is part of a development where the 50 percent limit set aside for foreign buyers has not been exceeded.

Midli said that foreign purchasers can buy the property as long as the developer has already registered the project with the Foreign Investment Review Board (FIRB), a government institution that issues permits for developers to sell units in their projects to non-Australian residents.

Once a parent or an investor is granted approval to purchase an apartment, he or she is required to make a down payment of up to 10 percent of the total price of the property, with the balance being paid by installment, she said.

In Melbourne, investors interested in buying "off the plan" or not-yet-constructed property are exempt from paying some of the stamp duty and development tax, which is around four percent of the sale price. "The longer the period of construction, the smaller the stamp duty will be," she said.

With the purchase of an apartment, the parents can also use it as an investment. When their children have completed their studies, they can either rent it out or sell it.

"When the apartment is sold, 10 years later, say, the value of the apartment will have increased and, thus, the parents can profit from the sale of the apartment," she said.

Apartments located in a city center or close to universities are preferred locations that attract parents with school children or investors as they benefit from high property values and are easily rented or sold. The occupants have easy access to public transportation and other facilities.

Therefore, it is not surprising to see that apartments in cities like Sydney and Melbourne, where many prestigious universities are located, are popular among overseas parents and investors, including those from Indonesia. The center of Melbourne, for instance, has become a preferred location for apartments as the city hosts numerous top-notch universities, such as the Royal Melbourne Institute of Technology (RMIT), Melbourne University, Monash University, Taylors College and Angliss College.

According to Midli, apartments are usually semi-furnished, with the standard facilities provided including a fitted kitchen, bathroom furnishings and built-in wardrobes. "Things like furniture normally depend on individual taste and, therefore, are left to the occupants to provide," she said.

The price of apartments varies greatly, depending on the location and the size. The price range for a one-bedroom apartment in Melbourne is between A$300,000 (about US$210,000) and A$350,000. A two-bedroom apartment costs between A$350,000 and A$600,000. The price for a three-bedroom apartment can be up to A$600,000.

While the purchase of apartments by Indonesian parents is mostly connected with the needs of their children for accommodation while studying in Australia, many discerning Indonesians buy houses there as second homes that they can use when on holiday there.

Others buy homes in Australia as they want to spend and enjoy their twilight years there, especially those who have permanent resident status.

Meanwhile, those who purchase houses for investment purposes include developers that want to take advantage of the good prospects for real estate in Australia.

"Investors can be developers who buy, build and sell for short or long-term profit; build and rent for wealth creation or a combination of the two as a property development business," said Paul Johns, managing director of PT Ausproperti Prima Griya, the local office of the Perth-based Ausproperty Group.

According to the company's regional manager, Cameron McNamara, the demand for homes in Australia has been on the increase due to a growing awareness among Indonesian investors about the investment opportunities available in the Australian property sector.

"Nearly all capital cities experienced strong growth averaging around 20 percent last year," he said.

The main factors contributing to the increase in property prices is the strength of the Australian economy, especially the Western Australian economy, which had a growth rate of 7.6 percent in 2003, said Paul Johns.

Preferred locations for houses among Indonesians are the suburbs, but not far away from the city. In Perth, Western Australia, popular locations for homes include Applecross, Attadale, Winthrop and Bentley.

The easy and straightforward foreign investment procedures set by the Australian government have encouraged foreign nationals, including those from Indonesia, to invest in the country's property sector. Perth in Western Australia is one of the most important destinations for property investment in the country, Johns said.

Buying a house in Australia also constitutes a safe investment. "The investors, for example, can pass ownership of the property to family members by bequeathing it in their wills," he said.

Unlike in Indonesia, foreign nationals are allowed to acquire unrestricted freehold title.

The prices of houses vary depending on the location, and the type and size. The prices of mid-market homes in Perth range between A$250,000 and $500,000 (US$170,000 and $345,000).

The growing interest in investing in property in Australia prompted Ausproperty Group to set up a local office in Jakarta, PT Ausproperti Griya Prima, in 1998.

Ausproperti Griya Prima assists clients in finding and selecting suitable land, transferring property into clients' names with all the necessary approvals, Australian bank finance and accounts, and building design through to completion. "We can arrange for the rental or purchase of homes in all Perth areas, as well," Johns said.