Investing in U.S. residential property is a viable option for Australians and New Zealanders given the market is doing incredibly well and is continuing to trend upward.
U.S. property investment is a great way to gain an extra stream of income because a typical property in the U.S. is nearly the equivalent to a downpayment in Australia and New Zealand, making it a much cheaper option. Now that’s a bargain.
Investing in property in Australia and New Zealand can often cost hundreds of thousands of dollars—and that’s just in deposit. The price bubble in Australia and New Zealand has made it near impossible to land a good deal. But a property in the U.S. will cost you a fraction of Australian and New Zealand prices because of how hot the market is now.
Many real estate agents would encourage you to invest while the market is booming.
Now is the time to overcome the fear of investing abroad and land those properties at prices you’ve never witnessed in Australia and New Zealand before.
Why is foreign investment in the U.S. residential property market so popular?
Real estate shot up when the COVID-19 lockdowns in the U.S. ended, causing a surge in the housing market. More people wanted to buy because they wanted to escape cramped cities or search for areas that are more conducive to working from home, causing prices to rise and demand to skyrocket. The economic repercussions of the pandemic didn’t seem to affect the market, making it more attractive than ever.
With the relative stability of the U.S. residential market, foreign investors everywhere are experiencing positive cash flow possibilities. With prices so affordable compared to the Australian and New Zealand markets, investors are definitely getting their money back and then some.
In terms of debt, it’s much more favourable than their foreign counterparts. The long-term debt scheme has people in awe when compared to how quickly Australians and New Zealanders need to pay back debt. The debt terms last years and are generally pretty flexible, which we’ll get into later.
And the best part is that the U.S. housing market is unlikely to crash soon. While this spike in activity resembles the events that lead to the U.S.’ Great Recession, lenders have stricter policies now and there are better structures in place to avoid such a price bubble bursting. With this stability, people can expect the market to continue on this trend.
3 key differences between investing in the US and in Australia or New Zealand
In order to establish how different the markets are in the U.S. vs. Australia and New Zealand, we’ve listed down three comparison points.
1. Mortgage rates
As mentioned earlier, mortgage rates in the U.S. tend to be more long-term than in Australia and New Zealand. They often span 10 to 20 years, giving the homeowner a lot of time to pay off their debt as compared to the variable rates in Australia and New Zealand. This rate is often fixed, which is a key difference to rates in Australia and New Zealand.
In Australia, it’s much shorter, spanning about 1-5 years—a fraction of the time in the U.S. In New Zealand, it begins even earlier, from six months to five years and all at variable rates, which makes it more difficult to pay debts.
2. Stamp duties
When it comes to stamp duties and taxes, the U.S. has little to no stamp duties at all which makes Australians “very keen to get involved” according to Your Investment Property Mag. Because of this, they find better opportunities in the U.S. without having to pay exorbitant amounts in taxes, unlike in Australia and New Zealand.
In Australia, stamp duties are state taxes that can be fixed or increased depending on your property’s value. Several other charges are added to that, like the Land Transfer Charge, causing your property investment to cost even more than you anticipate. These are extra payments paid on top of the property value, making it somewhat unattractive and expensive.
While Australia does have stamp duties, applying for the First Homeowners Grant is possible, rendering stamp duties unnecessary.
In New Zealand, stamp duties aren’t necessary, however, extra cash needs to be prepared for valuation charges, which is another expense on top of the property price.
3. The nature of the market
In the U.S., there are less restrictions, making property investment more flexible. When it comes to raising capital or looking for ways to finance a purchase, they’re not as strict and they allow foreign investors to handle their investments with ease.
Real estate agents in Australia and New Zealand often take care of the property and become property managers themselves. But in the U.S., you need to hire a team in order to take care of the property, try to sell it, and maintain it. Having a team you trust can make or break your investment and it eliminates the need to have to fly over and check on the property yourself.
When it comes to investing in the U.S., many investors are met with hesitation because they’re not sure how to go about it, especially since it’s on the other side of the world where they can’t be hands-on with the investment. Even though people feel like it’s a big risk, a lot of successful Australian and New Zealand investors can vouch for it.
“We were excited most about investing in the U.S. because of greater returns than anything I can get in Australia,” says Barbara Waller from Bairnsdale, Victoria.
Investing in the U.S. doesn’t have to be a daunting task nor is it as difficult as it sounds. By acknowledging the differences between the U.S. residential property market and the Australian/New Zealand market, it’s easy to see that property investment in the U.S. has a lot more advantages as compared to local real estate.
If you want to invest in the U.S. and start a new stream of income that you can rely on, book a call with us.