Buying costs are low in Papua New Guinea
November 14, 2017
How high are realtors’ and lawyers’ fees in Pakistan? What about other property purchase costs?
|Stamp Duty||2% - 5%||buyer|
|Costs paid by buyer||2.01% - 5.01%|
|Costs paid by seller||0%|
|ROUNDTRIP TRANSACTION COSTS||2.01% - 5.01%|
| See Footnotes
Source: Global Property Guide
Footnotes to Transaction Costs Table
Stamp duty is levied at progressive rates, from 2% to 5%, on the property value.
|PROPERTY VALUE, PGK (US$)|
|Up to 36,000 (US$12,000)|
|36,000 – 70,000 (US$23,000)|
|70,000 – 140,000 (US$46,667)|
|Over 140,000 (US$46,667)|
|Source: Global Property Guide|
Registration fees are around 0.01% of the property value. Registration fees include transfer of title documents and the title documents.
A guide to buying real estate in Papua New Guinea
Papua New Guinea now has a sizeable real estate market. Developers and homeowners alike have experienced rapid price growth. But be warned - purchasing real estate can be tricky for the uninitiated.
This guide solely deals with land registered at the PNG Department of Lands’ Land Title Registry, otherwise known as alienated or fee simple land.
Financing your purchase
It is important to be aware of your borrowing power and financial status before committing to purchasing real estate in Papua New Guinea. This is particularly important for expatriates and foreigners needing a loan.
Thankfully a number of local and foreign lending institutions can provide finance for real estate purchases. The largest local bank in PNG is the Bank of South Pacific (commonly known as BSP). BSP offers comprehensive retail and corporate lending services and has over 3,000 staff in PNG alone.
Alternatively, you may consider foreign banks such as Westpac and ANZ, both of which have offices in the capital, Port Moresby. Westpac and ANZ are particularly convenient for Australians considering buying PNG real estate.
With respect to interest rates, foreign exchange, first homeowners grants and similar issues associated with financing a property purchase, the BSP loan calculator and the loan calculator are handy tools.
Sourcing the right property
Once funding is secured, your search can begin in earnest. Hausples.com.pg carries stock from all the major real estate agencies such as Century 21, the Professionals and Strickland Real Estate.
Confirming the value the property
Once you have located possible properties, it is important to ensure that the prices being asked are reasonable.
PNG’s real estate market is wholly unregulated and there are no professional valuation services. In addition, there are no published property price indexes or historical data. Some property portals are starting to produce price information, but the data is still very limited. So the best thing is to talk to several real estate agents, and ask their advice. There are directories of real estate agents at Hausples´ agents list and Global Property Guide (Real estate agents in Papua New Guinea).
Generally offers for sale of land are made and accepted in writing. So it is very important to include all relevant information in your written offer such as proposed price, that the sale is subject to finance etc.
Once terms have been agreed, purchasers need to notify their bank or lender, who will then review purchase documentation. Often the lender will also seek to inspect the property itself. When the lender is satisfied, you will be notified whether you have received financing approval.
Paying a deposit
Ordinarily purchasers are asked to pay a 10% deposit to have the property taken off the market. However, purchasers may choose to wait until financing approval has been confirmed before paying the deposit. This is a prudent step, as sellers may elect to retain the deposit should the agreement not be expressed to be ‘subject to finance’.
When settling the deposit, make the payment via a lawyer or a trustworthy real estate agent. This will ensure that your deposit payment is secured in a trust until the sale is final.
The sale of land contract – investigating title
Payment of the deposit will prompt the seller’s lawyer to draft the contract for sale. While you’re waiting for this step to be completed, it is highly advisable to source a local lawyer to investigate the title.
There are a number of large international law firms in PNG and local firms to consider. International firms include Ashurst, Allens and Gadens, whilst locals firms Posman Kua Aisi and Warner Shand Lawyers. There is a directory of lawyers at Global Property Guide (Lawyers in Papua New Guinea)
PNG stamp duty
Transferring real property in PNG usually attracts stamp duty.
Stamp duty is calculated according a scale published by the Internal Revenue Commission. You can use the handy stamp duty calculator at Hausples.com.pg, which also accounts for the PNG first homebuyers grant. Please note the first home buyers grant is generally only available to PNG citizens.
Approval from the ministry
Non-citizens or company buyers will likely need approval from the Minister of Lands to buy land in PNG. Most PNG citizens are exempt from this approval requirement.
Your lawyer will provide advice regarding approval requirements according to your specific circumstances.
The seller’s lawyer will contact your lawyer and possibly your lender on the date of settlement, provided any necessary approvals have been granted. Both your lender and lawyer will look over the paperwork, including the contract, to make sure everything is correctly handled and documented. Then they will provide the necessary cheques for the agreed purchase price.
Registering with the Department of Lands
Post-settlement, your lawyer of financier will register you ownership with the PNG Department of Lands. Ordinarily your bank or lender will process the registration on your behalf.
Post registration, your bank or financier will hold the original documents associated with your registration, such as the title, until you have discharged your finance obligations by paying off your loan.
Purchasing real estate in PNG can be a complex and daunting process. This is guide is just that – an overview of the basic of purchasing. You should always engage professionals to assist with your purchase such as a lawyer and real estate agent.