Why Your Plan to Move to Australia and Buy a Cheap Farmhouse Sucks
Lots of Singaporeans have this great dream of moving to laid-back parts of Australia, living and working there and enjoying a chill lifestyle. How many of you know friends who want to buy a big house in the outskirts, or ‘live out on a farm’? Now, at 99.co we always believe in supporting people’s dreams. But we also believe in giving people a fair dose of truth.
We’ll just put this out here: Most Singaporeans are used to a level of convenience, adjusting to rural Australia definitely won’t be easy.
It’s not easy to continue earning an income
Here’s a big one. Living on a farmhouse is cool and all, but have a serious think about how you are going to generate income, even if you’re thinking of living ‘off-the-grid’ and being completely self sufficient. Why? Because it’s naive to think you won’t need to pay for anything.
Jobs in rural areas are usually hard to come by though, so it’s best you have a backup plan.
What I’d do before moving :
Amass a huge amount of capital, invest it, then use it to collect passive income. The average expenditure for an Australian is around AUD$3,000 a month. To earn that amount based on a 5 per cent dividend yield, you’re going to need at least AUD$900,000.
If you’re planning to live on less and be less consumerist, you can consider halving that down to AUD$450,000. But it’s better to be on the safe side. If you have a HDB flat in Singapore, you could also potentially rent out for additional passive income.
Alternatively, find a way to run a business remotely from the farmhouse. This could be an internet business, etc etc etc, Imran will have some ideas for you.
Which brings us to the next point…
Getting a home loan is complicated
Unless you intend to pay for the farmhouse upfront, you’ll need to get a home loan from either a Singapore or Australian bank. This is a complex process with a ton of unpredictable consequences.
For example, Singapore banks – should they choose to give you a loan for an Australian property – might only give you a Singapore dollar-denominated loan. So if you’re buying a house in Australian dollars, the currency exchange rates can result in situations like a margin call (having to top-up the loan in cash), or a sudden spike in home loan repayments for the month.
At any rate, Singapore banks typically provide loans only for properties in major Australian cities. It’s improbable that you’re going to get a loan for a farmhouse on the outskirts.
On the other hand, getting a loan from an Australian bank can result in a much higher interest rate. At the time of writing, interest rates from Australian banks are around four per cent per annum (fixed rate), whereas rates are below two per cent in Singapore.
Then there are issues such as how to qualify for the loan on either side, different Loan to Value (LTV) ratios, and enough paperwork to give you a hernia just lifting the files off the desk. At the time of writing, most Australian banks will give you an LTV of just 60 per cent as you’re a foreigner (and forget about using your CPF).
What I’d do before moving: Ideally, try to pay for the whole property without the hassle of a mortgage. This immediate upfront cost will have to be factored into the retirement plans.
Reduced access to services/convenience
What do Singaporeans do when the trash overflows? Or when your e-scooter catches fire and razes the house down? That’s right. You call the Town Council and SCDF.
If you live in rural Australia, you might need to rely on a commercial (expensive) service to help you the trash, or take it to a landfill yourself. With regard to emergency services, expect slower response times from the police, fire-people and ambulances help you when shit hits the fan.
While rural Australia has greatly improved its infrastructure over the past decade (especially for country towns), you should generally expect a lower level of convenience compared to the cites.
What I’d do before moving: Spend a few months living in a rural area before pulling the trigger. Find out what it’s like to live in a place with few shops, no nightlife, very little convenience stores – THEN decide. Because renting an ulu place for a year – cheaper than sinking your life’s savings into a property you might grow to hate.
Residency and Citizenship
You’ll need a certain number of points to fulfill the requirements to become a PR in Australia. And last I checked, being an ‘unemployed farmer tending to a little garden’ did not make it on the skilled immigration list. The alternative is to make investments in Australia; such as something to the tune of AUD$5 million, or securing funding of up to AUD$200,000 to commercialise a product or service in Australia.
Also, have you seen how a certain group of Singaporeans like to complain about foreigners entering the country an taking up jobs? Remember, you go over to Australia, and you’re that foreigner they’re complaining about.
Capital gain? Rental yield? Nah.
Ever wondered why properties in rural Australia are so affordable? It’s really supply and demand. Much of the population growth takes place in the big cities. It’s where the action is at.
The small towns and rural communities where your farmhouse is set in? They’re bleeding out. Young people in smaller towns and rural areas typically aspire to go to the “big city” where there are wider opportunities.
Which means there is terrible demand. And lots of supply. Rural properties take much longer to resell, compared to housing in cities or larger towns. Also, don’t expect high capital gain. And don’t expect to rent out rooms in your house for decent income either. Your five bedroom house means nothing if there are no tenants.
As an aside, note that foreigners are generally allowed to purchase only new properties. This means that when it’s time to resell, you’re going to have to sell back to local citizens and not other foreigners – this narrows the pool of prospective buyers somewhat.
(If you’re purchasing just the land to build your house on it, you need to finish it in four years – and you can’t even purchase the land if it previously had a dwelling on it. Your purchase has to add to the current housing supply.)
If you want exceptions to be made – such as if you want to buy an existing property – you’ll have to write to Australia’s Foreign Investment Review Board; which is also where you pay various fees for application.
What I’d do before moving: If I’m going to lock down $300,000 – $500,000 in a house like this, I’d make sure i’m either…
- Be 300,000 per cent sure about living a quiet life in the countryside on a farm and I am determined to make EVERYTHING work. Because once you sink in that money, pulling out will be a painful process – as mentioned above foreigners like us can only sell property to Australians – so this could be a tough sell.
- Be so wealthy that $500,000 is nothing to you. If you found HDB prices in Singapore expensive, this will most likely not be you.
Prepare to pay to maintain your property.
- Clearing vegetation
- Mowing and slashing
- Hay cutting and baling
- Tree pruning and felling
- Tree planting
- Fence maintenance including electric fencing
- Road maintenance
- Herbicide spraying
- Insecticide / Pesticide spraying
If one of these sounds alien to you, you should probably relook your plan to own a farmhouse.
At the most basic level, what are you going to do if a large animal decides to die in front of your house? As a Singaporean, it’s unlikely you’ve ever had to haul a carcass equal to your body weight off your property. And we’re used to shooing off stray cats, not actual wild animals with the ability to tear our faces off.
Also, note that Australia has its own counterpart to town councils, which also charge fees (these vary based on where you live).
In case you think I’m opposed to the idea, I am not.
Look, who doesn’t love huge swatches of land, big houses and being surrounded by nature ? Singaporeans are drawn to what they cannot have, and really, I see the appeal.
But man, think carefully before you pull the trigger and take the plunge.
Buying property is no joke – it’s a serious endeavour.
Moving away from Singapore is no joke – it’s also a serious endeavour.
Put both together, and you’ll have a potential recipe to change your life…or make it an absolute disaster.
Would you move to rural Australia? Voice your thoughts in our comments section or on our Facebook community page.
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