Many South East Asian countries have experienced
a recent surge in property price. Many locals are finding it harder and harder
to afford local properties. To make matters worse, various governments
including Singapore and Malaysia had put in harsh anti-speculative measures to
cool the property markets.
These factors contributed a rising interest in
foreign property investments, which are viewed as affordable compared to local
properties.
However, unlike local properties, purchasing an
overseas properties entails many considerations which are absent when investing
locally.
1. Local
Knowledge
Familiarity and local knowledge goes very far in
property investment. Know your goals and investment strategy – is this property
a buy-and-hold or a buy-and-flip?
With your strategy in place, study the property
market cycle in the respective country and area. What is the direction of the
property market trend heading? What is your exit strategy?
Understand the local situation; is the country
experiencing political unrest, strikes or anti-foreigner sentiments? What kind
of natural disasters could occur in that area?
Research the location thoroughly. Ask for access
to good quality maps of the surrounding area. Enquire about the accessibility –
quality of public transports, access to major roads/highways, proximity to
amenities, distance to commercial areas, is the location surrounded by good
neighborhood.
Examine the track record and reputation of the developer.
Has the developer completed projects of similar scale on time? Has the
developer delivered on quality? Has the necessary permits for construction
obtained?
Finally, understand the potential tenant and
customer profiles. Who is willing to rent my unit? Who will buy my unit when I
sell?
2. Rules
and Restrictions
Some countries may impose limits on location,
types, reselling restrictions, use or purpose of properties that foreigners may
invest in. Check with a local authoritative source or read up on the
regulations from government websites.
Prior to signing any documents, agreements or
options, ensure that you have read and understood what the terms and conditions
are. Ask for a translated copy if the document is written in a foreign
language. When in doubt, seek advice from local lawyers, bankers or valuers.
Always do your homework!
3. Cost
and Financing Limits
Property transaction cost and financing limits
vary from country to country.
Find out the conveyancing fees, legal fees and
mortgage legal cost. Obtain independent valuations on the property and find out
the loan-to-value that you are eligible for. Study the interest rate situation
in the respective country.
Be sure that you have properly understood and
factored the taxation cost in the transaction. Some in some jurisdictions,
foreigners are subjected to levies or taxes on property purchases.
Additionally, there may be property related taxes such as income tax, property
tax, stamp duties, capital gains, estate duties, state fees and withholding tax
that may be imposed.
Overseas investments also exposed you to currency
fluctuations and exchange rate risk, you may be affected by these currency
movements.
4. Sales
Pitches vs Reality
Always treat information from sales agents with a
pinch of salt especially if the claims are too good to be true. Never trust
artist impressions of the development which typically paint an unrealistic
situation.
Don’t be mislead by cheap prices of the unit
especially when they come heavily laden with discounts, waivers or freebies (eg
free club membership, legal fee waiver, zero interest financing, rebates,
furniture vouchers, flight tickets to visit the development). These “carrots”
are usually priced-in. Check the terms and conditions of these offered. Ensure
that all special incentives are written into the agreements. Finally, is the
price offered something a local would pay?
Be cautious of investments that offer abnormally
high returns or guarantee a minimum yield. These are usually capped, limited
time frame or simply just projections! Obtain independent valuation reports,
surveys and compare them against their peers.
5. After
Sales
Find out the support that the developer provides
to foreign investors. Ask for the frequency of progress reports and be clear of
the payment milestones. Obtain contact information of the agents, bankers,
valuers and lawyers.
Be aware of the legal and dispute resolution
avenues available to you should things turn against you. What is the
jurisdiction that the dispute is handled?
Who will assist you to run and maintain your
unit? What assistance is available to advertise and seek tenants? Who execute
your instructions in your absence?
Never rush into any overseas investments.
Exercise due diligence and do not be pressured by sales agents. Carefully
consider your strategy and financial commitments.
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