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SCMP Reporter

BUYING a home in Australia is an appealing prospect for Hongkong people. And there are two simple factors that make it so - price and size.

  For the same amount you would spend on a 700-square-foot flat in Hongkong, in some major cities in Australia you could buy a home of staggering proportions in comparison.

  It would easily get you a four-or five-bedroom home in a prestigious area, a huge garden, a swimming pool, expansive living areas and probably enough change left over to pick up a 700 sq ft unit as an investment.

  It seems like a dream for Hongkong investors. But like many things, attaining that dream is not always that simple.

  When the sometimes complicated picture of taxation enters the Australian home-buying picture, it may force some prospective buyers to baulk at the opportunity of buying down under, no matter how inexpensive the price.

  But with a little knowledge and some sound advice, buying property can be a sound and relatively inexpensive and trouble-free investment, especially at a time such as now, when many believe the market has bottomed out.

  According to Mr Nick Dignan, tax manager with Price Waterhouse Hongkong, Australian property is becoming more and more popular.

  ''The reasons for this are varied,'' he said.

  ''Perceived uncertainty over the future of Hongkong and the relative weakness of the Australian dollar are both commonly cited.

  ''This, coupled with the widely held view that the Australian property market has bottomed out, has raised the interest of Hongkong investors and bargain hunters,'' he said.

  But simply arriving on Australia's shores with a wad of cash is not going to get you a house.

  According to Mr Dignan, there are a number of important issues that need to be considered .

  First, you need to know if you are allowed to buy a property.

  Australia places certain restrictions on the foreign ownership of real estate.

  ''It would also be prudent to ensure that you know the market and physically inspect a property prior to purchase,'' Mr Dignan said.

  He urged a trip to Australia to inspect the property before purchase.

  Tax and investment regulations that govern Australian property will vary depending on the circumstances of the investor.

  The critical factor is whether the investor is a resident of non-resident, according to Mr Dignan.

  Mr Dignan said that all property acquisitions from developers of residential properties from foreigners had to be submitted for approval by the Foreign Investment Review Board.

  But there are exemptions. These include:    ''Off the plan'' developments. These are developments still under construction or newly completed but yet to be occupied or sold.

   Purchases of properties by intending immigrants who have been given approval to take up permanent residency.

   Acquisitions of units or homes under ''time share schemes'', so long as the entitlement is less than four weeks per year.

   Purchase of real estate that has been designated as an ''Integrated Tourist Resort''.

   Non-residential commercial properties valued at less that A$5 million (about HK$26 million).

  But it is not always as cut and dried as that. Authorities were sometimes willing to take into account other considerations, Mr Dignan said.

  For example, foreigners may be allowed to buy both commercial and residential real estate for development or buy up to 50 per cent of developed commercial real estate with 50 per cent Australian equity partnership.

  ''In some cases, up to 100 per cent of foreign ownership may be permitted where the property has been marketed for longer than three months or is sold at public auction or tender,'' said Mr Dignan.

   Mr Dignan said temporary residents who remained in Australia for more than one year could also purchase a home as long as it was used principally as their place of residence.

  Once a residence is purchased, then the spectre of taxation appears.

  ''The main taxation considerations for an investor are likely to be the deductibility of holding costs, including interest, and capital gains tax,'' Mr Dignan said.

  In Australia you are entitled to a tax deduction for all ongoing holding costs of your property, if it is viable for rental or being rented.

  Mr Dignan said these costs would include interest, local government rates, rental commission, maintenance, insurance, management fees and utility fees.

  If your property is not available for rent, these costs will not be immediately deductible but may be included in the cost base of the property to reduce any further taxable gain.

  Mr Dignan said the largest ongoing cost in property investment would be interest.

  Profit made on the sale of a property used as an investment is subject to capital gains tax.



Buyers home in on property bargains