Since the Australian authorities have tightened its lending measures to foreigners, George is now faced with a few choices:
Option 1: To forego the 5% payment that he has made for the purchase of the property in Perth, Australia. This means he’ll be defaulting on the contract with the developer. However, his future property purchase there (if any) will carry this black mark on his credit score.
Option 2: To raise another 80% in a short timeline of 1 month on top of the 20% that took 3 years to set aside. Borrowing from Malaysian banks, which gave out loans in the past for selected foreign properties, is also futile, for they too have now pulled back due to slowing economic climate back home.
Option 3: To work with the developer to sell off the completed property in the secondary market and the next buyer will be indirectly executing George’s contract with the developer. However, this was proved to be challenging because when the property was initially purchased, Perth’s mining economy was in full strength. Demand for housing was very strong and prices were on the high side.
With mining activities moving at a much slower pace now, valuations have fallen by 10% and at best, he can only sell the apartment for A$500,000 (RM1.69mil). That still leaves him with A$50,000 deficit owing to the developer.
All 3 options look bleak and he may be forced to take the least painful route. He’ll be flying off to Perth to meet the developer and hopefully work out a solution that is wallet friendly.
What started out as a happy occasion has slowly transformed into a financial nightmare for George. By nature, property investing is a capital intensive game. By venturing into overseas market, one needs to be fully aware of the legal and financial ramifications in the event things go sour.
To those of us who are thinking of purchasing overseas, do your homework by speaking to those who actually have bought units in the past as well as to professionals such as bankers, accountants and lawyers in the destination country.
Match their answers and see whether there are any inconsistencies or contradictions. It may save many thousands of hard earned money as well as the headache and heartache that come along as well!