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What is the general climate of real estate investment in your jurisdiction?
Investment is hot in New South Wales and Victoria, but much cooler in other jurisdictions.
Who are the most common investors in real estate?
Investors come in many classes. In relation to residential real estate, the investment market is dominated by older individuals, professionals, overseas buyers and in particular those operating self-managed super funds. In commercial real estate investors are predominantly institutional-grade organisations such as real estate investment trusts, superannuation funds, hedge funds and the government. Foreign investment in commercial real estate is also strong, particularly from pension funds, sovereign wealth funds and large international property management companies, with increasing investment from elsewhere in the Asia-Pacific region, especially China.
Are there any restrictions on foreign investment in real estate?
Yes – there are restrictions on foreign ownership of real estate, but these are limited to the requirement that foreign parties obtain prior government approval. Approval to purchase existing residential dwellings is not generally granted and foreign purchases are restricted to newly constructed buildings.
What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?
Individuals tend to invest in residential real estate in their personal capacity, as this allows rental losses to be offset against their personal income and they are entitled to land tax and capital gains tax exemptions for periods where they may use the property as their principal place of residence. Commercial real estate and property development is often carried out using a unit trust structure, as this allows income to be distributed to unit holders with tax paid at the unit holder level, and not by the trust itself.
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