Considering a real estate purchase? These tips could help you make a sound investment
If Hong Kong’s famously sky-high property prices are forcing you to look to investing in overseas real estate, be sure to understand what’s stopping you from considering purchasing in the city.
That was the advice from Christopher Dillon, author of the Landed series of real estate books, when he appeared at the June 28 club lunch. Dillon cited a recent report by US planning consultancy Demographia which judged the city as the least affordable in the world having found that the median property price in Hong Kong is now 19.4 times the median income.
But he added: “Before you write off your city as too expensive do some research: investigate your options in terms of size, age and location, and ability to repay a mortgage. With this information you’ll be able to recognise and act on a bargain and take advantage of a market dip should one of these occur.”
In terms of buying overseas, Dillon’s advice was “do your homework” before you decide on a purchase by spending time in the area, look at the weather and amenities, read the local newspapers, talk to local people, rent on weekends during different times of the year.
Another factor to be considered, Dillon said, was lifestyle: if you smoke cannabis or are gay places like Singapore – which has strict anti-drug laws; and Malaysia, where gay sex remains illegal; would not be the ideal choice.
Check whether foreign nationals can own land, as opposed to only the buildings that sit on the land, he said.
“Can somebody with your passport own property? In Thailand, for example, if you’re not a Thai national you cannot own land. You can own a building but not the land underneath it. The same holds true of the Philippines,“ Dillon said.
Hidden costs will also present challenges to investors. For example, he said, if you buy a home in Phuket there’s a very good chance you’ll have to pay extra for water due to a chronic water shortage.
And those lured by bargain off-the-plan investments – where the buyer pays a deposit on a property before it’s even built, having secured it at lower-than-market cost – need to be aware of the risks of late or unfinished delivery. In some cases, developers have gone out of business part way through projects.
“Buy from a reputable agent who is representing an established builder,” Dillon advised.
One market that does appear attractive is Japan, which actively encourages foreigners to buy and not only allows them to own land, but also charges the same tax as permanent residents.
Watch Christopher Dillon’s talk for more tips on real estate ownership at home and abroad. Contact [email protected] for your free 127-point Buyer’s Checklist.