Is Foreign Real Estate Investment Worth Your While?


Investing in foreign real estate is shaping up to be a promising avenue for investment that is financially accessible to households with even a middle class income.

For the vast majority of Singaporeans patiently zeroing down on their home loan repayments, the prospect of investing in foreign real estate seems too financially grandiose for them to even consider. It’s an investment scheme stereotyped to multi-billionaire business tycoons who have enough money to make Scrooge McDuck go green with envy.

Unfortunately, this unfounded bias is cultivated in citizens because of the extremely steep cost of living in Singapore and a lack of foresight in the global real estate market. The thought of owning a spacious property at a fraction of a cost of the cramped apartment you live in would seem too good to be true. But what if we told you that the only difference between your financial dream and reality is waking up to make the right investment?

Yes, investing in foreign real estate is shaping up to be a promising avenue for investment that is financially accessible to households with even a middle class income and above. Here are the top 5 factors that are driving this new trend, which will tell you how making the plunge into overseas real estate is worth your while:

Local Property Rates Overloading
It’s no secret that Singaporean real estate rates are at an all-time high and purchasing property has become a high-risk investment for people who are left wondering whether the bubble will burst or not. Due to this, property investors could be getting a bad deal by paying a premium price and not gaining sufficient value growth on their investments.

Poor Rental Yield Rates
Due to the spike in property rates, there has been a corresponding drop in rental yields as well. Over the last 4 years, the residential property rental yields have average between a paltry 3.15-3.5%, which means that investors have been paying more for the potential rental income than they should.

Unattractive Short-term Investment Conditions
Meticulous government protocols have made it a bigger headache for Singaporean real estate investors. For example – the introduction of a seller’s stamp duty for property investors who purchased residential properties after Feb 2010, which is calculated based on the equivalent rates as the buyer’s stamp duty. The SSD rates vary according to the holding period of the property, which are:
16% for 1 year
12% for 2 years
8% for 3 years
4% for 4 years

Hence, the market has become quite unfriendly for short-term property investors who want to obtain quick returns.

Diversification in Real Estate Portfolio
Property investment may be vastly different from stock investment; however, the same rules apply when it comes to diversification of portfolio. The overseas real estate market varies according to the unique economic conditions in each country.
Foreign countries with a sizeable domestic industrial sector are subject to lower volatility in property prices since their rise and fall in demand is dictated by domestic expenditure. Hence, it’s a rational assumption that there will be some unforeseen growth and decline in the overseas real estate market, which means it is a good idea to mitigate risks by opting to buy properties in various countries rather than limit that investment to a country’s real estate market in its booming stage.

Ducking and Dodging the Steep Costs of Living
Although the yearly average inflation rate of Singapore over the last 30 years has been a secure 2.1%, the effects of compounding have been underestimated. Between the years 1980 and 2010, the upward growth in Consumer Price Index turned out to be an astounding 43.6%.

The strong upward trend in CPI is felt by a vast majority of Singaporeans now who are finding it difficult to prepare for a healthy retirement due to the exorbitant costs of living. This makes foreign properties an attractive investment for those seeking either a high-return investment for their retirement, or simply a nice place to move to after retirement in a country that has a very reasonable cost of living.

What do you think?