The difference between American and Australian property investment



Australia vs America



The difference between American and Australian property investment is a hot topic of discussion currently. We look abroad more to vet the successes and failures of other countries. As Australia is exposed to American culture frequently it stands to reason that we are interested in how they do real estate.



There are several American property shows on television that cover everything from small-town revamping to million-dollar listings and they are hugely popular. Indeed, as an Australian, it is frustrating seeing some of their prices. Australian property prices are much higher on average than in the United States (US).



It is not uncommon to see large homes in beautiful locations for half what we would pay with the same location in a major city. Obviously, geography is very different as Australian major cities are all near a coast but that is only one of the differences.



So, what are the main differences between Australia and the US?



  • In the US, every property sold has both a ‘listing agent’ and a ‘selling agent’ (known as a buyer’s agent in Australia), and the vendor pays a commission to both of them.



  • US real estate agents mostly work conjunctively and share commissions 50/50. They also do not try to compete on commission or undercut each other.



  • In the US property market operates on a ‘sharing’ ideology, Agents share referrals, commissions, information, support and advice.



  • Women hold very senior roles in the property industry in the US. This is evident across the board and includes real estate agencies, associations, development companies, etc. The Australian property industry is still a very heavily male-dominated industry.



  • Australia uses auctions extensively as a method of sale. In the US buyers relate auction more to foreclosure.



  • Escrow is the term used in the US when a property is sold. The Australian escrow is when real estate agents or legal professionals hold the deposit in a trust account until the deal is complete.



  • In the US developers often build apartment projects to ‘build and hold’, leasing out the apartments after completion rather than selling all as most Australian developers do. The Australian strata title model is called condominiums in the US



  • Australian property investors rely on capital growth to increase wealth, whereas, in the USA, capital growth is secondary to rental returns.



  • Mortgagee sales in Australia mean the vendor still must pay back the bank if they sell at a loss. In the US the seller leaves the property without having to pay back the bank once the bank forecloses.



There are benefits and problems in both countries and it is not easy to compare because both systems are so different. It is also very difficult for either country to adopt favourable components because the systems are culturally entrenched. The comparison does expose that Australians approach buying and selling very differently.