Investing in an unfamiliar foreign market holds high risks, such as foreign currency fluctuations, property market trends, sovereign risks and interest rate risks, warned the Consumers Association of Singapore (CASE) in a media release on Monday (May 4).
The association said that it received 13 complaints from consumers regarding their investment in foreign properties 2013 and 2014. It stated that most of the complaints involved consumers who had invested in foreign properties but were unable to get back their promised returns or pay outs.
Many of them also made the foreign property purchase after promises of high rental yields or high capital growth.
However, many of the consumers were unable to obtain any update on their investment and in some cases, lost contact of the property investment company, losing more than S$100,000.
According to CASE, overseas property purchases by Singaporeans – reported to be one of the top real estate buyers in Asia – have increased significantly in recent years, with a large number of foreign properties being advertised and marketed in Singapore.
Prices have also declined sharply in some cases, resulting in investors losing a large sum of their money, said CASE, while developers of foreign properties have also become insolvent and unable to continue with development, resulting in a total loss of the investment by the consumers.
“CASE is very concerned about the recent proliferation of advertisements on foreign property investments,” said Mr Lim Biow Chuan, President of CASE.
“Such advertisements often make positive claims about the investment value of the properties and the potential returns, but they seldom clearly disclose the risks and the legal and regulatory framework involved in foreign markets which are very different to Singapore,” he added.
To ensure that investors are able to make a well-informed investment decision, CASE proposes that developers selling foreign properties in Singapore provide informative fact sheets to investors when signing the contract.
The fact sheet should include, among other things, the financial standing of the developer, clear and comprehensible information about the developer’s obligations and the investor’s obligations and a proper valuation of the property.
CASE would also like to provide the following advice for investors:
- Weigh commercial risks before investing in large-sum investments
- Research on the foreign property before purchasing it
- Check the financial reliability of the developer and the reputation of the company
- Be prepared to hold on for a long period before seeing return on the investment
- Do not commit to a purchase based of advertisements with attractive promises
- Read and understand the terms and conditions of the contract
- Note that applicable laws in other countries may be different from Singapore
- Investors that have a dispute with the investment company should seek legal advice.
Source : Channel NewsAsia – 4 May 2015