Why Invest In Australian Property vs Property In United Kingdom?

Published 21 December 2021 by Team :Different

Why invest in Australia’s property market, you ask? Simply put, the Australian real estate market has shown time and time again that it is a highly stable and reliable market. Just in the last year alone, property prices increased by a whopping 16% - and yes, that happened during global lockdowns!

The truth is that If you’re considering buying property overseas, you might be tempted to dive in head first. But before you do, it’s important to know the ins and outs of the market you’re diving into, whether that’s the Australian or UK property markets. 

This handy guide will break down the latest market trends, tax laws, and long term growth in Australia and the UK, as well as some compelling reasons why you should invest in Australia’s property market. Your next great asset awaits!

When it comes to investing in Australia, while it’s important to know the right time to buy real estate, it’s equally essential to spend time in the market.

In fact, time in the market can actually be better than timing the market. Getting your foot in the door of property investment is the crucial part - once you’ve got yourself an asset, you can just watch it grow.

With that being said, a savvy investor still keeps an eye on the latest market trends before diving in. So, let’s have a look at how the markets in Australia and the UK are faring when it comes to:

Home prices and market growth

When experts discuss why you should invest in Australia’s property, they’re not exaggerating when they say Australia is a hot market. And for those wondering - is the Australian property market about to crash? The answer is a confident and resounding no.

The Australian real estate market has always been stable and secure. Not only is the Australian property market absolutely not about to crash but, compared to other developed nations, it has continued to thrive even through the pandemic. That’s why for locals and for folks living overseas, knowing how to buy investment property in Australia can be a great way to tap into additional income.

It’s true - even through the COVD-19 pandemic, the Australian real estate market has experienced exponential market growth, and it hasn’t been confined to urban living either. Regional Australia property prices jumped up by 12.5% between June 2020 and June 2021.

The increase is likely to continue in 2022, with the growth rate slowing slightly. The robustness of the Australian property market is precisely why you should really consider investing in it.

In the UK we’ve seen a slightly different story. The UK market has been considered a recovering market with slower growth because of the economic uncertainty brought on by Brexit.

However, during the pandemic, home prices in all regions of the UK increased (between 2019-2020) including a 6.2% increase in London property prices.

So, while the increase in the UK market hasn’t been the same as the Australian market, it has been doing well regardless. Experts say that as of October 2021, growth has slowed but will continue.

What about tax?

Investors are sometimes eager to tie down a property and may end up rushing into something they don’t fully understand yet. It’s important to understand your financial liabilities and responsibilities before buying overseas. Tax is definitely a responsibility you should own inside and out.

We’ve summarised the tax requirements and financial liabilities related to investing in Australia Vs. the UK in the following table.

Tax and financial liabilities

Australia

United Kingdom

Rental income

if income is more than 18,200 AUD

rates of 0%, 20%, 40%, or 45%, depending on income

Capital gains

on selling the property when purchasing

rates between 18-28%, depending on the capital gains income

GST

renovating and reselling the property

purchasing property

Stamp duty

depending on which state you plan to purchase in, and how much the property costs, you may be exempt

after the first £250,000 of the property purchase

Other financial liabilities

When you’re expanding your portfolio and making your mark abroad, you don’t want to get surprised by any sudden costs

Here’s a breakdown of the financial liabilities you need to be aware of so you don’t find yourself in that rather unsavoury situation.

Expenses of purchasing investment property

Australia

United Kingdom

• Legal fees to arrange for property purchase and contracts

• Legal costs

• Mortgage registration fees

• Mortgage arrangement fees

• Inspections

• Class 2 National Insurance

• Landlord Insurance

• Property S\survey

Deductibles and tax benefits

Enough with the bills, it’s finally time for some good news! 

Did you know that you can offset your investment taxes in Australia and the UK? In fact, as we explain in our property tax guide, there is little that you can’t claim to reduce your tax bill.

Here’s an easy table breaking down what you can offset.

Tax offsetting and deductibles you can claim

Australia

United Kingdom

Council rates / tax

Utility Bills (Water, Gas Electricity bills)

Land rates / Council Tax

Strata fees / Service charges

Ground rents

Property management fees

Advertisement fees

Maintenance and repairs


(doesn’t cover improvements)

Landlord insurance

Legal fees


(legal fees for one year of leasing)

As long as your home is tenanted, you’re pretty much set for tax deductibles in any particular financial year.

In Australia, you can claim borrowing expenses and capital items or expenditure on investment properties after a few years. The key is to distinguish between repairs, maintenance and capital works. 

Another great tax offsetting opportunity in Australia is depreciation - if your property was constructed after 1988, you can claim a 2.5% depreciation deduction on the construction costs every year for 40 years after the date of construction.

Not too bad, huh?

Growth and diversification

When you’re an investor, you have to think of both short and long term growth and how one investment can enhance your entire portfolio. Depending on what you learn, the investment could prove to be a stroke of genius or a total fail. 

Let’s wrap up this race by giving you the lowdown on how the Australian and UK markets fare in terms of growth and diversification:

Market growth and diversification

Australia

United Kingdom

Short term growth

Rental yield increased over the past year both in urban and regional areas despite the 2021 rental moratorium to support people through the pandemic.

Buyers are flocking to the market with low mortgage rates and growing home prices. The rental market is looking very healthy as well.

Long term growth

The market is stable and poised to continue growing, even though it might be at a slower pace. These predictions apply to both regional and urban areas, meaning that if you sell down the line you could be looking at impressive capital gains.

Despite predictions of a fall in prices in 2021, home prices have slowly continued to rise. However, experts expect growth to slow down significantly in the next few years so it might not deliver the gains you’re hoping for.

Diversification

Diversification within the Australian property market is a great way to lower the risk of your portfolio and expand it. That’s because property diversification leads to higher yields and a steady growth of investment capital over time.

Similar to Australia, lowering your investment risks can be achieved with diversification, not only in general, but specifically within the UK property market. Diversification of property assets (commercial Vs. residential) will lead to a broader range of tenant clientele, and thus higher yields and capital growth.

In a nutshell, both the Australian and UK property markets are good options for buying overseas, regardless where from. They provide good diversification opportunities and have similar financial liabilities, with Australia offering more flexibility on stamp duty - depending on the state.

The Australian property market has proven extremely reliable, faring through the 2008 financial crisis, booming through COVID-19 pandemic, and set to do just fine for the foreseeable future!

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Disclaimer: The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.

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