Buying property overseas? Here are 6 things you should consider
According to the PropertyGuru Consumer Sentiment Study, Australia, Malaysia and Thailand are the most popular locations to invest in overseas property. But what should you know before getting started?
In the PropertyGuru Consumer Sentiment Study conducted in 2020, nearly 40 per cent of Singaporeans surveyed indicated they were planning to purchase property overseas within a few years’ time.
Singaporeans’ appetite for overseas property investments in no way suggest sluggish demand at home. In fact, sales of new private homes from January to October 2021 have already surpassed the full-year sales figures compared to the past three years.
Signs of robust sales continued, and in November 2021, 77 per cent of the 696 units of CanningHill Piers in River Valley was snapped up on its launch weekend, including its sole penthouse which sold for a cool S$48 million. Of the new homeowners of the 99-year leasehold luxury condominium, a majority 81 per cent were Singaporean citizens.
“Singaporeans trust property as an asset class,” said Raymond Kong. “And real estate is one way for us to diversify our investment portfolio.” At the recent Exceptional Homes, presented by CNA Luxury and PropertyGuru, the partner of Foo Kon Tan LLP drew comparisons of the security of a diversified stock portfolio with the appeal to invest in overseas properties. Real estate may be less liquid, he says, but investors are able to enjoy a stable rate on return over time.
Despite the economic dampener COVID-19 has put on many industries, property prices in Singapore have continued to rise for the sixth consecutive quarter, including a 3.88 percent increase in Q4 2021 as reported in the PropertyGuru Singapore Property Market Index (PMI).
Relative affordability may be the main factor for Singaporeans looking for homes beyond the country’s borders, but there are several aspects luxury property investors should consider when considering property overseas.
The PropertyGuru Consumer Sentiment Study found that Australia, Malaysia, and Thailand were the most popular locations among Singaporean investors. But each of those places vary in regulatory framework, their different appeal, connectivity, and cost of living.
With travel time of just four hours (to Perth), Australia’s proximity to Singapore, as well as its cultural and sporting pull has drawn a lot of overseas interest. Its steady property prices has allowed Bangkok to be considered a safe investment option, while villas on Thai islands have become synonymous with tropical luxury. Closer to home, the long-term relationship with Malaysia is bounded by ties of kinship, culture, and economic interdependence.
Within each of those countries, investors have a wide choice of settings for their new homes, be it urban, beachfront, on a hill or fronting a lake. “Luxury property buyers emphasise lifestyle and principles of living,” said Matthew Ang, senior executive director of HLB Ler Lum. “Hence it is not merely buying, but investing. And most important is managing investment for optimised return.”
Interested buyers should also address why they are looking to buy overseas. Will this be for a primary residence, for retirement purposes, a vacation home, or purely an investment for a rental property? Depending on the usage, a trusted tax advisory would be able to advise on the optimum structure in which to hold the property, whether it is under an individual, through a company or a trust. “The capital gains tax that you pay,” said Paul Ashburn, co-managing partner of HLB Thailand, “will depend on whether the property is owned by an individual or a company.”
In addition to tax reasons, the reason to own a house will also affect the location where the investor should look. If it’s for a future emigration with a family, proximity to schools would be advantageous, while retirees might prefer to be closer to golf courses and medical facilities.
Strata or landed? Title or non title? Freehold or leasehold? Primary market, secondary market, or distressed properties? What you’re buying will dictate everything from how long you have to complete the purchase, who is responsible for stamp duties, as well as estate planning should the tenant for a leasehold property passes.
“In Australia, we have homes with character,” said Josh Chye, partner, HLB Mann Judd, pointing to examples including Edwardian, Victorian, and properties with heritage overlay. “Buyers will need to do due diligence to ensure the property is something they can actually buy, and change to their needs.”
There are other legal implications to consider. In Thailand, for example, foreigners can own up to 49 per cent of a condominium building (provided the buyer can show the money is remitted from overseas), but land ownership is still banned. According to Paul Ashburn however, there have been discussions to relax some of the current policies in order to attract overseas buyers.
Having a holiday home to where you can escape and unwind sounds great on paper, but who will look after the property when you’re not in residence? Resort estates might have on-site property services to handle the maintenance and owner services including rental, and in recent years, luxury developments in Bangkok are increasingly teaming up with recognisable hotel brands. The brands are brought in to offer hotel-like services and amenities in addition to the prestige they lend to the development, with the Thai capital boasting an impressive rollcall of branded residences including Four Seasons, Mandarin Oriental, Banyan Tree, Ritz Carlton and The St Regis.
When it comes to purchasing a property, timing must be considered. In Malaysia, for example, the source of funds remitted into the country must be verified. Caught off-guard by the added time-consuming process, Matthew Ang reveals he has seen numerous transactions that fell through because funds simply couldn’t arrive on time.
The listed property price is one thing, but there are other aspects to consider when looking to buy an overseas home. The cost of acquisitions and maintenance will have to be considered, as well as stamp duties, legal and other advisories to navigate the nuances of a property market that you might be more unfamiliar with.
“In Singapore, higher tax looms for residential properties,” said Raymond Kong, listing buyer’s stamp duties, additional stamp duties for second homes, and potential seller’s stamp duties. With the Singaporean government now studying how to expand the wealth tax system next year, the time is now to invest in property beyond the Garden City.
This article was first published on PropertyGuru.