Property investments are expensive. We all know that. After all, land is limited and owning a space means having the right to use this space for your private use at a loss to others who can’t use it.
Of course, I’m simplifying things here. Property prices are not merely limited to that – take into account factors like safety of environment, luxury, location advantages, etc; We are looking at property at not merely land, but an accumulation of all these factors. As such properties have been a coveted asset since the dawn of man due to its intrinsic value.
Relating back to Singapore – You can imagine why properties are so costly here, with the very limited land space we have and our reputation as a safe haven with resilient property prices regulated by law. Additional cooling measures also only make properties more expensive. This does make investing into properties in Singapore an option not for everyone despite its excellent asset quality.
This then led people to think – How about buying overseas properties for investment purposes?
It’s certainly a possible option. We have heard of our friends and relatives buying overseas properties and making a quick, tidy sum from it by flipping or some holding properties and collecting high-yielding rental.
However, don’t simply dive right into buying any overseas property investment you see! As with any forms of investment, one has to assess and see if it suits your investment strategy before moving in. Here are some key points for you to consider:
1. Property Prices
One of the largest considerations for investors when considering overseas properties. As Singapore is one of the costliest property markets in the world – Singapore residents are casting an outward eye to other markets to fit their budget.
There is a wide range of prices to consider here. Depending on the market you are considering – from emerging markets like Cambodia, Vietnam to mature markets like UK and Australia; the prices can vary quite a bit. Looking at the luxury, location and type of property, again the price will differ further.
Instead of being overwhelmed by the range and choices – look at the investment budget you are comfortable with and then assess on the options you have in the various countries.
2. Risk Management
This is highly important as you are now looking to buy into a market which you are not residing in, or lack of knowledge of. This is when you will need to assess properly on the project you are buying into. For a start, check on the following:
Project details – Location, property type, market supply and demand
Developer of the project – what is their track record and quality?
Country profile – is it stable politically? Does currency fluctuate often? What is the stand on foreign investments?
Work with the salesperson to learn more information, and Google your way here.
3. Property Management
If you are owning an overseas property – how do you maintain it? A well-maintained unit prevents physical obsolescence and it attracts tenants and buyers. But if you are not there, how is the upkeep done?
Different markets and projects have different ways of managing your unit, so it would be advisable to check on this before purchasing. Some markets also have established property management firms which you can hire to help you.
Also, there is the point of the country’s rules, regulations and taxes which you will need to consider too. Take these details into your consideration and costs too.
Example, are there any capital gains taxes upon selling? Or how much are the property taxes and how do I manage payments if it is a yearly recurrent thing?
Again, there are one-stop property management firms who can settle all this for you for a fee, but if you want to save on that cost – what are the options there for you? Clarify all this before purchasing.
4. Rental Returns
Rental returns may be an optional point for you, though this is good to know regardless.
Look at rental yield figures and assess what is the rate of return for the property in that area.
Demand analysis is important too so as to know whether if there is a solid pool of tenants which will affect your rental returns over the long run. Take into your costs too, if a local agent fee is required to obtain tenants for you.
As with many overseas projects, you may also see developers offering guaranteed rental returns for their projects. Do verify on the package offered and check on the developer profile. If the returns are authentic as part of the sales package and suitable for your investment portfolio, this is something you may want to consider as well.
5. Capital Appreciation
Most investors’ largest reason for investing overseas: “What is my profit if I sell my property after X number of years?“
Singapore properties capital appreciation is not that bad; actually, I would say it is pretty good. But, the high price is a big factor for many. However, the return on investments in overseas markets may be much larger – mainly the cost is lower and in an emerging market, the property price growth is faster.
To assess this, it will be important to consider the country you are buying in, and the area of the project. Is the country / area set to see greater growth in the future with investment from the government or foreign interest? What are the planned country or regional developments which will impact the growth of the country or area?
These are just a couple of questions you can ask. Work with the project salesperson and Google the macro trends to assess.
Upon assessment, it will then be good to consider your exit strategy too – what is the comfortable timeline for you and scenarios for exit. How do you go about doing it?
Summary
The points above will serve as a good guide if you are considering investing overseas. Definitely, there will be more points to consider depending on the context of project and your own situation. Seek advice from the appropriate persons if any doubts – lawyer, property agent, etc.
Happy Property Hunting!
*Do note as with all investments, be it property, stocks, ETFs, bonds, etc; there will be risks when investing. It is highly important to do your own due diligence before proceeding with any purchase
Are you considering overseas properties? Wondering what options are out there? Reach out to us.
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