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Overseas Property Investment Guide

Posted by alan mok on October 31, 2017
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Investing in Overseas Property can be incredibly tempting giving the nature of investments especially in high growth countries with Low/Deferred Payment, Guaranteed Rental Return, and a better quality of life but at a fraction of cost as compared to Singapore.  While the rewards can be high, but here are some factors that you consider or look out for when you invest in Overseas Property;

1) Regulations 

This is one of the most important factor. Different countries have different laws and regulations on foreign ownership. Like for example; Cambodia, foreigners are restricted from buying land or landed properties but they can invest in Luxury Condominiums/Apartments or even Strata Title Retail Shops with Freehold Status. In Vietnam, with the new Vietnam Housing Law with effective from 1st July 2015, foreigners who are permitted to enter Vietnam legally are now eligible to buy/invest in Vietnam Property. Foreign Ownership cannot exceed more than 30% of the total units in one apartment building. Ownership title will be on 50 years leasehold (renewable) subject to applicable laws. In Malaysia, foreigners can only buy properties above RM1million with Freehold Status. It is therefore good to do some research before you invest.

2) Political Stability 

This is paramount to the security and returns of your investments. Always be on the look out for political or social situations that may affect your investments. Political unrest may damaged your investment property with little recourse or in some instances, socially on imposing new laws on foreign ownership.  It is always good be on the safer side to invest in a politically stable country.

3) Foreign Exchange Risks

This is another factor you may want to consider when you invest in overseas property. As the investment will be in a different currency from Singapore Dollars, you will be subjected to Foreign Exchange Risks. Take for example, Malaysia where their currency is Ringgit. Ringgit have seen a fair share of up and downs along the years, it may be a cause of concern there could be a further deprecation but the same time, this also present a opportunity for investors who thinks otherwise and feel that Ringgit has reached its lowest and will be on the rise.

Another example let’s say Cambodia. Although the official currency in Cambodia is the Cambodian riel, however most (if not all) transactions are quoted in US Dollars. This applies also to property purchase as well. US Dollars as the world/reserve currency offers stability in terms of Foreign Exchange Risks. A recent check on the exchange rate US$1:S$1.42.

It is therefore important to consider Foreign Exchange Risks when you invest in overseas property and take hedging positions as and when applicable.

4) Developer and Track Records

Personally, i feel this is also one of the most important factor you may want consider when you invest in overseas property. There are instances where the developer disappeared with the purchasers’ money. There are also instances where the quality is compromised or it is not up to the standards. A reputable developer with good track record give the assurance that they have the expertise to a build a high quality development and delivered on time.

5) Exit Strategy

It is important that you have a exit strategy when you invest in overseas property. From the time the property is handover to you to the time when you dispose off the property. You will need a clear strategy or plan to maximize your returns on your investment. Like for example, does the developer has its own agency to help buyers to lease/rent out the unit after handover? What are the charges involved? Or does the property comes with Guaranteed Rental Return? What are the Capital Gain Taxes and who can i sell to – locals or can be anyone? These are important questions you may want to ask yourself from time to time as you invest.

The rewards of investing in overseas property can be high but at the same time, it comes with certain risks and it is always good to do your due diligence before you invest in one.

Disclaimer: This article is meant for research and educational purposes only. All information, especially property ownership laws, are subjected to changes and no responsibility shall be held on the accuracy. All sorts of property investments can be risky and investors are expected to perform their own due diligence before committing into any purchase.

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