Choose the Right City for Your Overseas Property Investment

Investing in overseas properties has become increasingly popular. Frequently promoted destinations include the Greater Bay Area (Guangdong-Hong Kong-Macao), Kuala Lumpur, Penang, Bangkok, Ho Chi Minh City, Osaka, Tokyo, London, Manchester …. the list goes on. Choosing the right city is the essential first step to a successful investment. Let’s get started with the key points of consideration.

Your connection with the city

It’s easy to confuse buying an overseas property with taking an overseas vacation!  Your love of traveling to Tokyo, by itself, is not a sufficient reason to buy an apartment there. Much more important is your actual connection with the city.  The ideal scenario is that you’ve lived, studied or worked in that city. At the very least, you have relatives or close friends living there.

Property investment is a complex undertaking. You need to have some level of a “local’s perspective” to assess the neighborhood, property developer, and appreciation potential among other nuances.  If your information source is just the property agent and Google, you have a much greater risk of falling prey to marketing scams.

If this is an investment property, you will also need local support in property maintenance, tenant management, etc. after you buy.  Agents are helpful, but it’s much better to have back-up support.

Local property market  

Check the state of the local property market.  Particularly, see if it is highly dependent on foreign investment.

Many overseas properties that are heavily promoted in Hong Kong are tailor-made for foreign investors.  There are many potential problems with this kind of offering.

First, prices are higher. Take the Twin Towers area of Kuala Lumpur and the Sukhumvit area of Bangkok.  The price per square meter of the advertised condominiums is often much higher than local properties just a few blocks away. Secondly, the market is bound to be unstable when buyers are mainly foreigners. In the last 12 months, for example, the number of Mainland Chinese buyers has been decreasing. The value of the properties is therefore subject to fluctuation.  They could also be difficult to sell in future.

A possible exception to these rules: You are planning to live in this city for retirement, and investment value is not a major concern.  In this case, you must be fully prepared financially to cope with your property’s operating costs and depreciation.

Macro Environment

Currency stability is your main concern, as it will directly affect the value of your property and the cost of your mortgage, if any. Political stability and economic prospects are two other obvious factors to note.  Population trends and demographics are next.  If a city has a declining and/or aging population, local demand for properties will likely decline in future.

Climate is a factor that many might overlook. For example, properties in humid climates require thoughtful upkeep to prevent mold, especially if you don’t live there often. The same goes for beachfront and seaside properties. Another example is properties in cities with very cold winters, like London. Heating can be a real hassle, especially if the property is a buy-to-let: Any grievance the tenant might have would be yours to deal with.

Do Your Homework!

Compared to other forms of investments like stocks, mutual funds, forex, or even local properties, investing in overseas properties is challenging, mainly because of imperfect information. A useful principle, therefore, is to choose a city where information is available to you more readily and at a lower cost, either because of your own experience and connections, or because the property market is more transparent.  And that’s just the starting point.  You cannot do too much due diligence when buying overseas properties.

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本文所提供的信息僅供一般參考之用,並不構成任何個人化的投資勸誘或建議。作者沒持有以上提及的股票。
HK MoneyClub (www.hkmoneyclub.com)