Return on investment (ROI) is a measure of profit relative to cost. To this day, it’s the main metric used to assess any asset class, including property.
If you’re a property investor in Singapore, you probably have several concerns making ROI a challenge for local investment. Mortgage costs are still somewhat high. In addition to that, the country’s Additional Buyer’s Stamp Duty (ABSD) is now 20% to 30% for properties purchased after your first.
This is why many investors are turning to international property investment opportunities instead. These aren’t counted in a Singaporean citizen’s ABSD and may offer rich yields as well as global diversification.
What Is the “Best ROI”?
ROI for residential properties is dependent chiefly on their gross rental yield, medium-term capital appreciation, financing, taxes, and currency effects.
Generally, you can check if ROI is good by checking these two numbers; however:
- The gross yield (it should be above 5%)
- The five-year price growth (it should beat inflation)
These are fairly simple yet useful thresholds for screening your options as of this year.
Five Top-Performing Overseas Markets for Property
1. United Kingdom – Average Yield of 7%
The UK has long been a good choice for people investing in property overseas. The national gross rental yields are at about 7.03%.
Northern cities like Manchester and Liverpool sometimes see even higher figures (like 8%). This is because of the undersupply of property in those areas.
In addition to that, the UK has a fairly transparent land-registry system and no foreign-buyer stamp duties. Bear in mind that the country does still have a 2% nonresident SDLT surcharge, however.
2. United States – 6-8% Gross in Some Cities
This is variable in such a large country, of course, but if you look at several of its major cities, the US is a good option for a lot of investors.
Typical gross rental yields in major U.S. cities range between 4-7%, depending on asset type and location, with higher yields (around 6-8%) possibly appearing in select markets such as Chicago.
You do have to remember that there are varying state taxes, however. Operating costs will also vary. Still, this is an overall good bet given the options for exit liquidity thanks to the deep mortgage market and dollar’s reserve status.
3. Thailand – 6% Yields Due to Tourism
Gross rental yields for Bangkok condominiums generally range between 4-6%, with prime districts near train stations closer to 6% and suburban or emerging districts around 4-5%.
Keep in mind that there is a restriction, however. Foreigners can only own strata units within the 49% quota here. As such, check quota availability before you buy anything.
4. Malaysia – Great Entry Prices
This is another good option if you want reasonable entry prices. Malaysia’s tend to sit below its regional peers.
Only adding to the benefit is the fact that Singaporean investors get an ROI boost when the ringgit gets weaker. However, remember the Real Property Gains Tax if choosing this option. It’s up to 30% and applies if the exit happens within five years.
5. Australia – 5% in the Gateway Cities
Gross yields in Australia’s gateway cities such as Brisbane and Perth typically range from 4-5%, with Perth closer to the upper end.
It also helps that Australia uses a common-law framework that Singaporean investors will be familiar with. But bear in mind that there’s a Foreign Investment Review board that needs to approve purchases and state-level surcharges of 7-9%.
Is Fractional Entry Possible for Investors?
For investors who aren’t willing to go entirely in on a big foreign property purchase, there are options for fractional entry now. RealVantage is an example.
Regulated by the Monetary Authority of Singapore, the company allows accredited investors to co-own institutional-grade assets worldwide from about S$10,000 per deal.
The concept behind the company is to spread risk across geographies and sectors while creating a more accessible investment option. This can help eliminate large down-payments, overseas loan paperwork, and tenancy hassles for investors as well.
A Final Word on Investing Overseas as a Singaporean
For returns that actually outstrip domestic property caps, remember to do your due diligence. Check titles and quotas, financing, taxation on non-residents, and exit liquidity before committing to anything.
Remember about the regulatory costs at home too. Overseas purchases still count toward your Total Debt Servicing Ratio, for instance. That may be something to consider, depending on your situation.
On the whole, however, there are many opportunities for savvy investors who want to buy property overseas. Add fractional-investment options and you have even more possibilities open to you.
