Market research shows that the global property investment market has increased by $1.3tn despite the prior 12 months of instability and economic uncertainty - the dollar remains strong against major currencies, creating investment opportunities in many markets. In this article, we’ll take a look at some of the reasons why you should consider investing in international real estate, as well as some highlights from key markets.
Low interest rates, coupled with tax incentives and Government stimulus packages have caused an unprecedented real estate boom, where double-digit increases have become the norm and supply struggles to keep up with demand. Whilst we hate to bring up COVID (again) it has undoubtedly played a part in shaping the current property landscape, based largely on Governmental response to the crisis - its restrictions, vaccine programme and financial incentives. Diversification of assets is one of the basic rules of investment, but this doesn’t just mean in different sectors or risk categories - it also means geographically and is an excellent strategy to best assure long-term growth and returns. Not being dependent on one country and therefore one Government, opens up multiple avenues for owners.
Where you invest depends on what you want from a property as well as the amount you have to spend - keeping in mind that many countries don’t offer mortgages to foreign buyers, so financing is via private means or lump-sum cash payment. In well-established markets like London and New York, you may only achieve 2% per annum and need a long-term exit strategy if you want to see any appreciation in the value of the property. Emerging markets by contrast, can offer 6-7% returns, plus yearly appreciation in the region of 10% which will continue long term and therefore offers a quicker yield. $1m in London is significantly different to $1m in Indonesia!
Many non-Western citizens have historically looked towards Western property markets, seeing them as a good option for protection from currency devaluation and political unrest - a ‘safe haven’. Whilst these markets are rightly regarded as stable, this mindset ignores the possibility for Western unrest, which can leave many property owners unprepared. Excellent examples are ‘Brexit’ and COVID - both have caused shortages of goods and services in the UK, plus low-level political unrest causing many residents to quietly and quickly move their money out of the country. This has turned the international property market on its head, with huge amounts of foreign money being invested into other countries, who have capitalised on the opportunity with tax incentives, funding and visa reforms.
The potential for financial unrest in your home country is an excellent driver for purchasing overseas - during the 2008 crash US and UK property values plummeted whilst those in Asia remained relatively stable and owners continued to have a passive revenue stream keeping them solvent despite fast contracting home economies and wide-spread job losses. Additionally, if you’re subject to a lawsuit in your home country it doesn’t include hard assets overseas - you can also take advantage of a residence visa, or passport in exchange for property purchases in some countries.
Looking to key markets, we start with the US - experiencing record highs, up 12.5% in Q2 2021 from the previous year. Homebuilding has traditionally been a very large part of the US market, but material access issues and financial uncertainty has curtailed supply, dropping new units coming online by 27% - whilst there is an interest in homebuilding, there is no activity and this has driven the resale market up. Although affordability concerns remain, incredibly low mortgage rates plus a stronger job market mean that home ownership is a possibility for more people - millenials are also entering the market and signs pointing to a balanced market by the close of 2021. Areas to watch include South Bronx - close enough for a reasonable commute into New York but with prices per sq ft sitting around $500 as opposed to $2000, rents are substantially cheaper and access to lifestyle amenities is still easy. Fort Lauderdale has played second fiddle to Miami in the past, but improvements to beachfront infrastructure including luxury hotels indicate a market upswing - great for those seeking a holiday home.
Moving to the UK, our focus is on London - despite the EU exit, unfavourable exchange rates and COVID repercussions, the market has remained strong with transactions at their biggest volume since Q3 2007 and values up by 8%. This is, in part, due to supply - there can only be so many properties in the prime areas of the city - and trends show buyers seeking unique properties that feed into their lifestyle aesthetic and aspirations. Younger professionals are looking for sleek, new apartments in the heart of London, driving the off-plan market. A lift on stamp duty at the peak of COVID rejuvenated the market, allowing first-time buyers an entry point which in turn helped existing buyers to ‘trade up’. Rental yields remain consistently strong and a trend has emerged of longer contracts, at higher initial prices, as tenants seek to secure properties that help balance work and life, so buyers looking for a rental investment are highly advised to consider (prime central) London.
The markets across Asia-Pacific continue to gather speed, and research shows that 10 of the 14 major markets have grown in 2021, most notably in Sri Lanka, Japan and Pakistan. Tokyo resales grew by 10.8%, with Beijing and Singapore following at 7.8% and 4.6% respectively. Sri Lanka rose 10% overall, with a 13.3% increase in Colombo - economic projections indicate 4% growth for the country this year. By contrast, the Philippines has continued to struggle in the wake of COVID and associated restrictions with prices down 21% YoY. The market experienced significant growth from 2010 - 2018, which was brought to a halt by US - China trade issues in 2019, which caused a general economic slowdown. The IMF is still predicting 5.4% growth for 2021 so buyers looking for long-term investment, without a need for immediate appreciation should not be concerned by a clouded economic outlook and could reliably consider investing in secondary residences here. Whilst the market may take some time to recover, generous returns will eventually come to patient owners who are able to ‘weather the storm’.
When it comes to property investment, the world truly is your oyster and discerning buyers, who have the benefit of tailored and expert advisory will be able to make considered purchases with an almost guaranteed return and appreciation, that diversifies and fortifies their portfolio. Our international platform showcases some of the very best in global properties, listed by key advertisers such as Capital Homes (London), Kensington - an associate of Christie’s International Real Estate (Morocco), Mirah Property Group (Bali) and Compass (USA). Our advertisers own the conversation with buyers, leveraging our digital impact with their local expertise to connect discerning buyers to the world’s finest homes.