Singapore Property vs Foreign Property - Investment 101
Property prices in Singapore are relatively affordable compared to those in top-tier cities like London and Beijing.
Property prices in Singapore are very stable because of government intervention and control.
Researching into demand-supply conditions and tenant make-up is important when considering investing in foreign property.
With the additional buyer stamp duty, some property agents are suggesting investing in a foreign property so that you do not need to pay such a high tax. These properties are usually located in emerging economies like the Philippines, Vietnam and Malaysia.
Singapore’s property is actually quite affordable. Property prices in the city area are going at around S$3800 - 4000 psf, while prices in other top tier cities like London and Beijing are much higher. With significantly more room for price increases, many foreigners are willing to purchase property in Singapore even though the tax is about 24%. Besides the potential for further price increases and relative cheapness compared to other cities, foreigners also view Singapore as an ideal place for starting a family given the high education quality and medical support.
Property prices in Singapore are very controlled. For example, even though prices were meant to increase in 2018, the Singapore government called for extra cooling measures including increasing ABSD and decreasing maximum loans. The floodgate is always controlled by the government. These measures stabilise the property market, especially in times of economic crises. In addition, these measures are always backed by economic and statistical reasons.
When you invest in foreign property, the currency is one factor you should consider. Singapore’s dollar is relatively strong compared to many other currencies. Even if the prices of foreign property increases, the depreciation of foreign currency may cancel out the capital appreciation gains.
It is important to understand the overseas property market well. In my opinion, Japan’s property market is attractive because the rules and regulations are safe, and the Yen has been quite weak for a while with good upside potential. You may want to avoid high developed areas like Tokyo and choose slightly less developed ones like Kobe, Osaka and Kyoto where tourist traffic is still high. I will also recommend buying near the city centre since many Japanese workers travel domestically and rent property in these cities. Your tenants are usually the locals in the Japanese property market. On the other hand, in Thailand, most tenants are foreigners.
Understanding the demand-supply dynamics and who are your tenants are important. Another example is Malaysia, where many developers promise shopping centres and amenities but are unable to deliver. However, demand is usually weak because the locals usually do not have the spending power to prop up these stores. The prices many foreign investors pay for the property in Johor Bahru does not make sense, given that the locals will not even purchase these properties. As such, researching local conditions is very important.
Property is a very tangible product, but many other countries do not have very transparent market information. Hence, it is considerably easier to perform research into Singapore’s property market than overseas markets. Ultimately, erring on the side of caution is important; if you do not understand the market, it might be safer not to invest in it.