As a purchaser of foreign properties, other than pricing, you will also need to look at other factors in deciding whether an investment is worthwhile. I will simplify my thoughts based on these 3 broad categories.
- Developer’s reputation – Have they had any past track records selling to foreigners?
- Financing – Can I get it locally or overseas? How does it affect my TDSR? When do I need to secure the loan? For example in Singapore, one needs to get an in-principle approval before getting a new apartment, whereas in other markets such as Australia, you will only secure your loan 6 months prior to settlement.
- Currency risk – Is the currency strengthening or weakening? Is it better to loan in foreign currency or your domestic currency? Are you able to minimise your exposure?
- Transaction costs , VAT, taxes – How are these affecting my cashflow?
- Regulations – Are there any additional regulations imposed on foreigner?
- Country risk – How much risk are you willing to take? Emerging countries are assumed to have higher risk and therefore higher returns. Are you confident that you have the appetite to stomach any change in the political situation? Countries such as Thailand had a coup, UK is going through Brexit but yet many investors are still entering the markets. Why? Countries deemed to be stable tend to offer lower yields. Are you looking to manage your upside risk or settle for lower risk?
- Who is managing the unit for me? This is the question that I frequently encounter.
- How long does it take to lease the unit? Different countries have different practice. For example, in Japan, no viewings are conducted when the unit is occupied by the outgoing tenant.
- Agent fee, leasing fee, management fees, income tax, withholding taxes? What are all these?
- Cashflow. How much negative cash flow is acceptable to you?
- How long should I hold?
- Is there a secondary market to sell the properties?
- Is there seller’s tax or capital gains tax?
- Can I remit my funds out freely?
The above questions are not exhaustive and an experienced agent will be able to advise you accordingly. Most importantly, is this property investment aligned with your investment philosophy and criteria?
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