Buy, buy, world
The strong Singdollar and attractive overseas offerings are drawing property investors here to venture abroad. Invest looks at some markets targeted at Singapore buyers
By: Joyce Teo
A quick look in the newspapers these days will present you with property investment opportunities from all over the globe.
They might be in the newly emerging Iskandar region right next door in Malaysia, Australian capital cities or major global metropolises such as London and New York.
The bulk, you will find, are London properties, which have attracted increased interest in the past year or so, say consultants.
'From the start of the year, more big agencies have jumped onto the bandwagon. They know there are more buyers here,' says DST International Property Services managing director Doris Tan.
Demand is, she says, 'helped by the fact that Singapore property prices are ridiculously high'.
'The pound is still weak, so that makes it attractive for buyers here to buy there.'
The British pound is currently trading at about S$1.96, compared with as much as S$3 just a couple of years ago.
More investors have also started to look for alternatives to the Singapore market after the Government introduced a series of cooling measures to dampen demand starting from last year. This has created price uncertainty in the market, says Mr Julian Sedgwick, head of international residential sales at Savills Residential.
And there is certainly no lack of choices. Apart from swanky city apartments in London, Bangkok and Kuala Lumpur, agencies here have marketed lifestyle properties in more exotic places such as Bali and the northern Japanese island of Hokkaido.
Singapore buyers have bought apartments in Niseko, a popular ski destination in Hokkaido. But consultants note that interest in the Japanese market has waned in the wake of the March earthquake that unleashed a tsunami.
Buyers can now even consider getting an apartment in Manila posh enough to rival those in a major city. Century Properties Group in the Philippines has started marketing Trump Tower Manila. It is developing the skyscraper, which boasts more than 220 luxurious residential units priced from S$260,000 to more than S$2.8 million, in Makati City, part of greater Manila.
Whether you are keen to buy in these markets or in the more familiar ones of Australia and Malaysia, you should always do your homework. Apart from the location, find out the costs involved, the ease of renting it out and the possible rental yield. Also check out the rules and restrictions in the country you are buying into.
Here is a quick look at the traditional overseas markets that Singapore buyers look to, as well as the United States market.
Those looking to invest nearby have to be selective in picking their properties unless they are buying to live there themselves.
'I would say the time to buy was two years ago,' says Savills Residential head of international residential sales Julian Sedgwick, of the Penang market.
Nevertheless, it remains a good bet for those keen on Malaysian properties, he says.
Penang's fortunes have revived as foreign investments and tourist arrivals rose from 2008, when it was recognised by Unesco as a World Heritage Site and when a new chief minister came on board.
Property investment firm IP Global says it is bullish on the Malaysian market, especially Kuala Lumpur, where there are many high-end condominiums offered at reasonable prices relative to Singapore. Prices in the KLCC area average about RM1,200 (S$480) psf. But that market is now plagued by oversupply, says Mr Sedgwick.
Another area calling out to investors is the Iskandar Development Region in southern Johor.
Leisure Farm, for instance, is marketing Bayou Creek in Johor Baru. The first phase consists of 96 semi-detached houses and bungalows, with prices starting from RM1.7 million (S$680,000), or S$145 psf, to RM2.5 million, or S$174 psf, respectively.
The head of Leisure Farm Singapore, Mr Peter Lim, says more buyers intend to live in the property these days, rather than to use it solely as a weekend or future retirement home.
Others may want to ride on the growth of the region, which is certainly 'the place to watch', says MrSedgwick.
'If you buy into the right project at the right price, it's a buy-and-hold investment. It's for investors who want to sit on it for 10 years.'
There may be a lot of distressed assets in the US. But with the 2008 meltdown and its savage economic aftermath still at the back of buyers' minds, investors remain wary, says IP Global's chief executive and founder Tim Murphy. 'Not every city or state in the country is now a 'safe' place to invest.'
New York is the safest bet, with prices still at 24 per cent below the peak of 2008 but rising, says Mr Murphy.
Average per-square-foot price in the first quarter was up 17 per cent year-on-year to US$1,306 (S$1,600), he says.
He is marketing 77 Hudson, where units are available at prices ranging from US$479,000 to US$2.5 million.
'Unlike the states of California, Arizona, Florida, Illinois and Michigan, where foreclosures represent 50 per cent of the entire country, New York's real estate market has held relatively steady despite an initial sharp drop in prices.'
Mr Julian Sedgwick, head of international residential sales at Savills Residential, says: 'You can buy amazing assets in Florida, Miami and Vegas, but when those markets are going back, no one knows. And whether they're going to fall again, no one knows.'
Says DST International Property Services managing director Doris Tan: 'The next place could be in the US - but we like to deal only with New York properties... It's more difficult to exit in some places such as Florida.'
Also, for US properties, there is a capital gains tax of up to 15per cent.
'There are also other taxes, so you need to make big money. Otherwise, the gains will be eaten up by the taxes,' says Mrs Tan.
A substantial number of buyers from Singapore buy properties in London for their children to live in while studying there. Others buy for long-term investment.
'Their kids may be eight or nine now, but because of the exchange rates, they are buying for their kids because they might go to university when they are 17 or 18,' says Mr Julian Sedgwick, head of international residential sales at Savills Residential. 'If you look at 2007, when you're buying a £300,000 property, that was going to cost you S$900,000. But today, if you buy it, it's going to cost you S$600,000.'
A one-bedder can cost around S$680,000 in Canary Wharf and around S$1 million in Knightsbridge.
The Singapore dollar's strength against the sterling and the attraction of London as a major city have also spawned a generation of buyers in their 30s who are new to investing overseas, he says.
Because the global financial crisis has made it harder for ordinary folks in Britain to get loans, developers there are keen to go overseas to seek potential buyers.
'Many of the large residential developments being created across Greater London in locations such as Croydon, Greenwich and Hammersmith up to 15 miles (24km) from central London are actively targeting Singapore as part of their campaigns to sell units off plan,' says Mr Mark Farmer, head of private residential at a London-based consultancy, EC Harris.
Singapore may possibly account for about one-third of all Asian off-plan new-build pre-sales in London, he adds.
Buyers like London because there's no capital gains tax like in the US, and there are no restrictions on foreigner-buying. Besides, prices are set to soar, by some 5 per cent to 6 per cent a year till 2015, according to property consultancy Knight Frank.
In a recent report, it has identified 13 hot spots, such as Nine Elms, Paddington/Bayswater and Earl's Court, which will outperform even the 30 per cent jump in prices expected in prime central London by the end of 2015 because of new transport links.
But DST International Property Services' managing director Doris Tan would have you know that central London is best.
'We have been around for 20 years and we are just concerned that people will go to other agencies and buy London properties that are not in the prime areas. Central London is still the place to buy.'
This area includes Chelsea, South Kensington and Knightsbridge, where there is high demand and very little supply.
This should keep prices on an upward trend at least for the foreseeable future, consultants say.
While the recent London riots may have scared off some investors, the fears are 'elevated', says Mrs Tan.
Knight Frank's head of UK residential research, Ms Grainne Gilmore, says the firm has 'seen no impact at all on demand from buyers of prime London property over the last month'.
Still, Mr Farmer says many are waiting to see if the recent riots in the wider areas of London will 'unsteady the insatiable appetite of overseas investment, particularly as Greater London locations have become more popular'. The riots hit areas such as Croydon and Peckham in South London.
There is also the threat of global uncertainty. Mr Sedgwick admits that 'people are getting a bit uneasy', though they are still 'achieving good prices' in London.
In any case, 'the days of flipping properties are definitely gone', he says. 'I always advise my buyers to look at it long-term. It's something that you look to invest in for three, five or maybe 10 years.'
In London, the gross rental yield for prime residential property is around 3.5 per cent, though in some areas, it can go up to about 6 per cent, according to consultants. Expenses can cut about 1 per cent off the yield.
A substantial group buy into Australian cities such as Perth and Melbourne, and typically do so for the sake of their children who are studying there, consultants say. There is another group who buy retirement homes and yet another looking to invest there.
After experiencing good growth for more than a decade, the property market in Australia is currently on the downtrend. Perth and Brisbane are the hardest-hit cities.
Some investors like Australia for its low entry point, but it has ceased to be the flavour of the month because prices have simply risen too much in the past several years, says DST's Mrs Tan. 'The Australian dollar is also very strong. It's a double whammy.'
Some new apartments in the country are priced from around A$450,000 (S$580,000).
Also, a major stumbling block for pure investors is the restriction that Australia places on selling.
Foreigners, who are allowed to buy only new properties, can sell them only to Australian citizens or permanent residents. They should thus buy only those properties with a resale market, such as those in a choice suburb.
Buyers like London because there's no capital gains tax like in the US, and there are no restrictions on foreigner-buying. Besides, prices are set to soar, by some 5per cent to 6per cent a year till 2015.
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