MELBOURNE: For Malaysian investors, Australian property has long held a particular appeal: a tangible asset in a familiar country, supported by a stable legal system and often tied to education, family or longer-term migration plans.
But buying and holding Australian property today can be far more complicated than choosing the right home or investment and securing a mortgage.
Profound Mortgage founder and mortgage broker Lisa Loh details one recent case that showed just how quickly the financing equation can change.
“My client is a Malaysian investor and non-Australian resident. They purchased an apartment in Melbourne about 10 years ago, maintained their mortgage with an Australian bank, and continued meeting their repayment obligations.
“Then the bank changed its policies for its foreign mortgage holders.
“The client was given about 90 days to either repay the loan in full or refinance with another lender. At the same time, her interest rate was increased immediately from 6.4% to 7.84%,” said Loh.
“People often think that once the loan has been approved and the property has settled, the financing side is done. But for an overseas investor, that isn’t necessarily the case. Lender policies change, and the options available to a non-resident can be very different from those available to an Australian resident.”
With Melbourne property conditions making a sale unattractive at the time, Loh quickly sought another lender and secured financing at 7.64%, allowing the investor to retain the property.
Australian lenders may assess overseas income differently, apply different serviceability standards and vary considerably in their willingness to accept particular residency and income circumstances.
That can leave foreign owners with fewer options if their existing lender changes policy years after the original purchase.
“For overseas investors, the question shouldn’t just be, ‘Can I get the loan today?’” Loh said. “They also need to think about what happens later if they need to refinance, if lender policy changes or if their circumstances change. The financing strategy has to last beyond the initial purchase.”
“A property might be a good long-term investment, but if your financing becomes difficult or expensive, that changes the overall picture,” she said. “Understanding your options before you buy gives you much more room to move later.”
For some Malaysian owners, the bigger surprise arrives much later, when they decide to sell.
Melbourne-based TJD Accounting international tax accountant Dominic Murphy said foreign investors frequently focus on purchase price, rent and capital growth without fully understanding the Australian tax obligations attached to owning the property.
“One of the biggest problems is that people can own Australian property for years without fully understanding what they were required to do from a tax perspective,” Murphy said. “Then they decide to sell, and suddenly all of those issues come to the surface.”
Foreign residents who own Australian property may have Australian income-tax obligations while they hold it, including declaring rental income.
When the property is sold, capital gains tax may also apply.
A major change took effect from Jan 1, 2025.
Under Australia’s foreign resident capital gains withholding rules, the withholding rate increased from 12.5% to 15%, while the previous A$750,000 (RM3.1 million) property-value threshold was removed.
That means the withholding regime can now apply to relevant Australian real estate transactions regardless of the property’s value.
Crucially, the 15% is generally calculated on the sale price, not simply the seller’s taxable profit.
For a foreign resident selling an A$1 million property, that can mean A$150,000 being withheld from the transaction unless an approved variation applies.
“The withholding is not necessarily the seller’s final tax bill,” Murphy said. “But if you weren’t expecting it, having 15% of the sale price withheld can be a major shock.”
The amount withheld is generally available as a credit when the foreign resident lodges the relevant Australian tax return and their final tax liability is assessed.
But this is where another problem can emerge.
Some overseas owners only discover at the point of sale that they do not have an Australian tax file number (TFN), or that they have not lodged Australian tax returns for years in which the property was producing rental income.
“If someone has owned an Australian rental property for many years but their tax affairs were never properly dealt with, selling the property can expose that very quickly,” Murphy said. “They may then need to obtain a TFN and bring their Australian tax position up to date before the whole matter can be properly reconciled.”
Australian government figures show that in 2001–02, real estate accounted for 92% of the value of proposed Malaysian investment in Australia, compared with 72% in 1997–98 and 55% in 1996–97.
The timing also coincided with an extraordinary period in Australian housing.
Between 1997 and 2003, Australian dwelling prices doubled, rising by an average of about 13% a year.
“In the 1990s and early 2000s, Australia was very attractive to Malaysian families,” said Prabu Ananthan Properties real estate agent Thiruchelvi Ananthan (Chelvi).
“Our buyers at the time already had children studying here, relatives here or some connection with Australia, so property felt familiar and relatively secure.”
Dealing in both Malaysian and Australian real estate for 50 years, Chelvi said the investment was never purely financial for some buyers.
Chelvi, who is also the principal of her agency, added: “Malaysians might buy Australian properties as an investment initially, but they were also thinking about their children, education or eventually having a base in Australia. It was often part investment and part long-term family planning.”
The broader Australian housing market was also delivering the kind of growth that naturally attracted overseas buyers.
By 2003, the Reserve Bank noted that house prices had risen sharply and broadly across Australian cities, with the median house price more than doubling from the mid-1990s.
Chelvi said the attraction has not necessarily disappeared, but the decision is now more complex.
Foreign investment rules have also tightened. From April 1, 2025, foreign investors were generally prohibited from purchasing established Australian dwellings, subject to limited exceptions.
For Malaysian investors considering Australian property today, the lesson from all three experts is much the same.
The property itself is only one part of the investment.
An owner may successfully obtain a mortgage, only to discover years later that refinancing options have narrowed.
Another may enjoy years of capital growth before encountering federal withholding, previously overlooked tax obligations or substantial state-based charges at sale.
