It’s not hard to see why foreign properties look so appealing. With rising property prices and foreign cottages or vacation homes costing only a fraction of local properties, it’s too tempting to ignore.
If you’re thinking about buying your first overseas property, here are some important items to consider:
Visit Foreign Property Exhibitions
The growing strength of the Singapore dollar against the Euro and US Dollar makes property investment overseas an enticing idea. Singapore’s growing interest in foreign properties has also attracted exhibitions from many international developers and agencies.
These exhibitions provide an excellent opportunity for you to both learn and ask questions about foreign property investment opportunities. These exhibitions can easily be seen in the Straits Times and occur from Thursday to Sunday almost every week.
Visit the Foreign Property Before You Buy
Seeing an exhibition is only the first step towards buying a foreign property. A brochure or seminar may be misleading, so if you’re serious about buying property overseas, visiting the property is a must.
Visiting the property also gives you a better idea of the property’s surroundings, such as the neighborhood, safety, transportation, and pollution level.
Know Your Financing Options
If you’ve already decided on buying a foreign property (hopefully after visiting to see it firsthand), it’s time to think about how to finance your purchase. Fortunately, there are many ways to finance your purchase from both local and international lenders.
Here are your financing options:
- Local Banks: Banks such as OCBC and DBS can finance 60% – 80% of the foreign property’s value, depending on its location.
- International Mortgage Brokers: These brokers offer loans to purchase property in countries such as the United States, but the amount you can borrow depends on your credit rating.
- Bank/Developer Partnerships: If you take out a loan with a developer’s “preferred” bank, you’ll not only have access to in-depth knowledge of property, but also a higher LTV.
What Factors Should You Consider Before Buying Malaysian Property?
The demand for Malaysian property has grown tremendously since the government’s cooling measures took effect in 2012/2013. After all, buying a landed property in Malaysia for half the price of an Executive Condominium (EC) in Singapore is enough to entice many buyers.
But before you jump into the Malaysian property market, evaluate the following factors:
- Housing Loan Interest Rates
- Down Payment
- Resale Prospects
- Oversupply Worries
- Rental Yields
Housing Loan Interest Rates
Having a lower interest rate means that you’ll have lower monthly repayments and higher capital gains upon resale. While Singapore’s home loan interest rates have hovered between 1% and 3% over the last decade, Malaysia’s interest rate is double that at 4% to 6%.
If you’re taking out a 30-year home loan, that could mean a difference of up to several hundred thousand dollars, depending on your loan amount.
In Singapore, depending on how many properties you own, you could be making a down payment of 40% to 60%, with a good chunk of that being in cash. Malaysia on the other hand only requires a 10% down payment.
Also, Malaysia has a Deferred Payment Scheme (DPS), which enables you to wait until your receive your Temporary Occupancy Permit (TOP) before making repayments.
Singapore’s property market values are well established and predictable. But in Malaysia, especially in Iskandar, resale values are less predictable. That’s because the property value in many regions of Malaysia is still maturing with the addition of new developments.
This could signal either a potential property investment goldmine if values skyrocket, or values could remain stagnant or plummet if supply exceeds demand. Only time will tell.
The limited availability of land in Singapore leads many investors to assume there could never be an oversupply of property. Malaysia on the other hand has an abundance of land and is site to many new developments, especially in Iskandar.
But with work on the high-speed rail linking Singapore to Malaysia still uncompleted, it’s too early to tell whether the rush to build developments will create an oversupply or not.
Malaysian property offers better rental yields than Singapore, which can be as high as 6% – 9%. That’s because Malaysian property is generally cheaper, meaning your rental yields will naturally be higher.
In addition, finding tenants can be easier in Malaysia because of developer programs that connect you to tenants, especially in hot spots like the CBD area of Kuala Lumpur. These programs it easier for you to find and manage tenants abroad, for a small “service fee” of course (usually a small cut of the rent).