Low interest rates boost investment
Property consultants say now could be the right time to invest in Australia's real estate sector, taking advantage of the country's low interest rates.
Associate director of Jones Lang Wootton's international division, Clive Chan Yiu-kwan, said interest rates in Australia had been fixed at 5.5 per cent since the most recent rate cut - the lowest in about 20 years.
Mortgage rates charged by banks would be 1.5 to 2 per cent higher, Mr Chan said.
According to Westpac Banking Corporation, clients can choose from various mortgage loan packages.
For instance, the mortgage rate of a Hong Kong currency loan package is fixed by the bank at the Hong Kong interbank offered rate plus a standard rate of 2 per cent. Concessions are available, depending on the amount.
HIBOR rate for three months as of Friday was pitched at above 6.656 per cent, meaning the total mortgage rate is more than 8.6 per cent.
For the Australian currency package, Westpac Bank charges a mortgage rate of the cost of funding in the Australian capital market plus the standard rate of 2 per cent.
As of Friday, the cost of funding for three months in the Australian market was pitched at 5.375 per cent, meaning borrowers who chose the Australian currency package were charged at a mortgage of about 7.3 to 7.4 per cent.
Financing cost of investment properties could be even lower as mortgage interest payments in Australia were tax deductible, Mr Chan said.
Taking the yield achieved on the investments into account, investing in Australian real estate had become attractive, he said.
Mr Chan said investment yield in office properties was about 8 per cent, while yield on shopping arcades was as high as 10 per cent.
Residential properties were relatively lower.
However, property consultants said tax charges in Australia were quite high. There were a number of tax items in Australia, including income tax, provisional tax, capital gains tax, land tax and stamp duty.
According to Colliers Jardine, different rates were payable for residents and non-residents in Australia, up to personal rates of 47 per cent on income of A$50,000 (about HK$293,000) and above. Company tax is 33 per cent. Capital gains tax is charged only on property acquired after September 19, 1985.