IF YOU’RE a private-property owner, have no intention of owning an HDB flat, are sufficiently cash-rich and still interested in purchasing property, you might want to consider the real-estate market overseas.
Be it for investment, or as a holiday or retirement home, an overseas property can be highly attractive, especially in markets where properties in general are cheaper than those in Singapore.
But property experts caution that buyers face a high risk. Reports of Singaporeans who bought properties overseas and ended up with poorly developed apartments or were swindled by developers who absconded are not uncommon.
Buyers thus have to be very careful in looking out for their own interests, especially since the Singapore Government does not provide any protection for the purchase of properties overseas.
A key to reducing this risk is extensive research. Potential buyers should familiarise themselves with the property rules and regulations of the country they want to purchase the property in.
Some countries prohibit foreigners from owning houses and apartments in certain zones or buying certain types of properties.
City planning, zoning requirements as well as building codes and restrictions may be important as well, especially if you intend to tear down and rebuild a landed property.
Additionally, potential buyers will need to look into the country’s property-tax laws and other legal issues, and check if they are entitled to any protection by the local government as home owners.
The easiest means to find out such information may be through government websites. Otherwise, advice can be sought from real-estate groups in the country of choice or a lawyer there.
That said, buyers need to make sure they choose trustworthy, reputable and qualified companies with a proven track record. This reduces the chances of being scammed, and will help ensure that the purchase process and subsequent management of the property will be well- handled.
It is also a good idea to get quotes of typical management fees in the area to gauge the value for money one is getting.
Furthermore, the buyer must be comfortable with the individual representing the selected company who is to manage his property as he will have to deal with him directly.
It is crucial that the individual not only has sufficient expertise, but also speaks both the local language and English fluently to adeptly explain any problems that may arise in the future.
When purchasing for investment, take special note of the surrounding amenities.
Assess the place based on both the rental potential of the area in general and the specific unit in particular, and choose a location which will likely see capital appreciation in the future. A property that is spacious and has a good view of some sort will likely help with this.
Potential buyers might also consider choosing a development that comes with a guaranteed rental agreement and yield for a few years.
It is essential, however, that buyers check that these contracts are backed by some form of asset by the managing company, and clarify the details, including the net amount of money which will be received and how often it will be paid out.
Also, before signing the purchase agreement, check that the property identified in the contract is the correct one as mistakes – whether accidental or otherwise – have been known to occur.
Another critical component is currency exchange-rate stability. Typically, markets in which the local currency is unstable are not recommended, as this can have a huge impact on many fronts.
Loan repayments and any amount spent on renovation and maintenance are affected.
More important is that the owner may lose a high percentage of any capital gain on the purchase if the property is sold at a time when the exchange rate is unfavourable. A clear but flexible exit strategy is therefore necessary.
That said, property experts here believe that the new housing rules will have limited impact on Singaporean demand for property overseas.
“The recent property rules are targeted more at ‘double timers’ – those who own both an HDB flat and private property,” said Dr Chua Yang Liang, head of research for South-east Asia at Jones Lang La- Salle.
“One would expect a higher probability of such buyers active in the Malaysian market, given the lower capital required. Hence, this recent policy is more likely to impact such buyers in the Malaysian market.”
He added, however, that the impact on buyers in the European market is much less as the profile of such investors are mostly of the higher-net-worth category.
Ms Teo Li Kim, associate director of consultancy and research for Knight Frank, similarly pointed out that the majority of individuals who have the means to purchase properties overseas are not those who have no choice but to buy HDB flats.
“They may play it cautious for a while, but they ultimately need to park their spare cash somewhere and real estate overseas will still seem attractive,” she said.
Source : my paper – 13 Oct 2010