More Indonesians buying Australian property

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.