Making money in Vanuatu

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Investing in a waterfront villa in the stunning South Pacific may sound like a pipe dream, but buying property in paradise is more feasible than you think. Sarah Megginson reports.

Vanuatu is a collection of 83 islands that blends boutique resorts, pristine beaches and genuine tribal communities with spectacular geography, including volcanoes and tropical underwater environments.

The local economy is driven by agriculture, fisheries and the tourism industry, which is experiencing rapid growth due to the high number of tourists visiting the country each year. Virgin Blue and Jetstar both fly direct from Australia to Port Vila, the nation’s capital, and the city is a permanent feature on P&O’s South Pacific cruise itinerary.

A lifestyle investment

According to Island Property Real Estate agents in Vanuatu, capital gains in residential property and vacant land has been best in prime areas such as the harbourfront, where you have the opportunity to enjoy good water and sunset views.

“For commercial property, along the main street of the CBD of Port Vila has also seen steady increases in market value,” the agency reports. “In some areas, growth of around 5–10% per year has occurred.”

As an Australian investor, you can buy a house or villa that you rent out to holidaymakers or full-time tenants.

You can also invest in housing developments where you’ll have access to full on-site management, which will take care of running, tenanting and maintaining the investment on your behalf.

Alternatively, if you want to live in Vanuatu, you simply need to buy a block of land for more than $60,000, as this will allow you to obtain your Vanuatu Investment Promotion Authority (VIPA) licence.

What are the risks?

There are plenty of plans in place to foster Vanuatu’s growth, but nothing is set in stone.

For instance, local authorities are looking to upgrade the harbour so that it can take more ships, which will help to grow the importing and exporting trade.

There is also talk about developing a new international airport, as the runway at Port Vila’s Bauerfield International airport is currently too small to accept 747s. This is an issue the local tourism industry would like to address, so they can receive direct flights – and thus more vacationers – from countries like China and North America.

If projects such as these come off, it will provide a great boost to the local economy. Until that point, however, Vanuatu’s economic growth is limited by its current infrastructure.

As a result, those considering investing in Vanuatu should adopt a long-term view, as you may not experience a huge amount of capital growth in the first few years. But, if you’re prepared to hold for the medium to long-term – or you’re investing for lifestyle reasons, as well as financial gains – then you could be on to a winner.

Financing the deal

Property advisor Bernard Kelly of describes the process financing an overseas property as being “quite difficult” – but Vanuatu buyers could be in luck.

“On the scale of 1-10, Vanuatu is relatively easy because the legal system is based on the UK model,” he says. “Australian banks, lawyers and accountants are well represented there, and you can readily talk on the phone in English as a mother tongue.”

Essentially, you have two options: you can organise finance with an Australian lender, or with a bank in Vanuatu.

“The only way to finance it with an Australian lender is if you already own property in Australia, and you use that Australian property as security,” explains Linda Clucas, Personal Mortgage Adviser at Smartline, Mordialloc.

“If you want to use the overseas property as security, then you need to apply to a bank in that country.”

Obtaining finance in Australia

“Borrowing in Australia for an overseas purchase is only possible if you have enough equity in your property here to borrow against,” explains Kim Wight, Personal Mortgage Adviser with Smartline, Oatley.

If you own your own home in Australia, and it’s worth $500,000 with a mortgage of $200,000, you have equity of $300,000.

You could tap into this equity and withdraw $200,000 to purchase property or land in Vanuatu. This would increase your home loan in Australia to $400,000.

“Your lender would want evidence of the sale contract for the property that you’re buying overseas,” Wight says.

“It’s quite difficult to do it successfully; if you want to buy property overseas, often your best bet is to arrange finance in that country.”

Obtaining finance in Vanuatu

There are four banks you can turn to in Vanuatu to finance your property purchase:

It’s possible to obtain finance for an investment or owner-occupied loan. For instance, the Westpac Investment Property Loan “allows customers to purchase a property for investment purposes,” according to Westpac Vanuatu. “The loan offers fixed or variable rates to suit your property purchasing needs.”

“Vanuatu has ANZ and Westpac, but that doesn’t mean you can easily arrange the loan from here, or that the process will be easier if you’re an existing customer in Australia,” clarifies Wight.

“Every bank has a licence for the country that they operate in, so you’ll likely need to go over there, sit in the bank manager’s office and provide them with the same level of information and comfort as you would when applying for an Australian property loan back home.”

You also need to be mindful of currency fluctuations. The local currency in Vanuatu is Vatu (VUV); 1000 VUV is currently worth around AU$11.

“When you put in a loan application, it’s processed based on the rate of the day, but that fluctuates,” Wight says. “So if you borrow today and our dollar drops in value by 5%, then you’ll need to suddenly find more money.”

One way around this is to deal with a foreign exchange company, which can lock in your exchange rate for a small fee.

Other considerations

Buying costs

As with purchasing property in Australia, you should factor in around 10% of the purchase price to cover acquisition costs.

Stamp duty is 2% of the purchase price, and the Ministry of Lands and Natural Resources also collects 5% of the sale price. Keep in mind that different rules apply if you buy a property in a company name. 

You should also allow another 2.5% to cover any other miscellaneous fees, borrowing costs and unexpected expenses.

Property management

If you decide to rent your Vanuatu property out to generate income, you will be required to collect 12.5% sales tax from your tenant and pay this to the government.

As with an Australian investment, you’ll also need to pay a fee of around 7-10% to your property manager or on-site manager to manage the rental on your behalf. Standard residential rental leases usually run for one year, but two and three years tenancies are also common with corporate/executive tenants.

If you own property in an urban area, municipal rates to cover refuse collection will set you back around $200 per year. All properties will incur electricity, water, gas and ground rent expenses; ground or land rent is paid annually and is calculated on the unimproved value of your land. It is a nominal amount, generally around AU$300-400 per year.

Leasehold land

All of the land in Vanuatu is known as leasehold land. Effectively, when you buy a property on leasehold land, you own the “lease” on the property for a period of up to 75 years. Once the lease is up, it can be renewed for a fee. This is currently 10% of the "unimproved land value" (as assessed by the Government's Valuation Unit) for urban land or 2% for rural land, plus any administrative fees.

A lease renewal can be negotiated at any time, on terms suitable to both parties.


According to Derek De Souza from Chan & Naylor tax and property accountants, any rental income received from a foreign property investment is considered by the ATO as taxable income.

However, you can also claim deductions for property-related expenses, such as mortgage interest and property management fees. “Under current Australian tax law, expenses incurred in deriving income that are subject to Australian tax are allowable deductions,” he confirms.

If and when you sell, capital gains tax will apply on any profits. “If you hold the asset for longer than 12 months, the 50% discount will also apply,” De Souza adds.

It may be possible to negative gear any losses you experience, but you should speak to an accountant for personal financial advice about these issues.

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