To understand more about, the and the factors that prevent different investors across the globe from putting their money into real estate abroad, we commissioned YouGov to poll 6,000 adults across five countries. The results – which reveal trends in the UK, South Africa, United Arab Emirates, Singapore and Hong Kong – make for very interesting reading.
In the third and final part of three blogs, we look into the top reasons why respondents are put off investing in international property markets.
Understanding local laws
The most cited barrier to investment abroad is a poor understanding of local laws, followed by a lack of knowledge of the markets themselves. Tax considerations prove important for those investing from the UAE and South Africa, while currency volatility is also understandably a barrier for the latter given the ongoing depreciation of the Rand.
For respondents in the UK, UAE and Hong Kong, finding a trustworthy managing agent and managing tenants are practical considerations that affect the likelihood of investment in real estate abroad.
In the UK, just 2% of the public have invested in foreign property, the lowest proportion across the countries surveyed and a trend that can partly be explained by the strength of the national property market. Our survey results show that other influencing factors include not understanding foreign laws or markets (both barriers selected by 50% of UK respondents) as well as the difficulties involved in managing tenants and finding trustworthy managing agents (both selected by 40% of respondents).
“When it comes to investing in property overseas, a lot of potential investors are overwhelmed by what they perceive as the complexity involved, when in reality these elements are often very straightforward,” says David Bellingham, Director and Head of UK & Europe, IP Global.
Singaporeans cited similar reasons to the British, with not understanding laws abroad (Selected by 54% of Singaporean respondents) and not understanding markets abroad (53%) the key barriers to entry, followed closely by tax considerations (51%). Singapore had the second-highest percentage of investors putting their money in property abroad at 8%, with top property markets being Australia (preferred by 32% of the Singaporean public), the UK (16%) and Japan (13%).
“All the top three destinations have a developed real estate market and well-defined rules and regulations governing the sector,” said Alex Bellingham, Director, IP Global. “This adds to their attractiveness for Singaporean investors who are wary of investing in countries where they lack understanding of local regulations in the sector.”
In line with the UK and Singapore, in Hong Kong the top two factors holding investors back from looking at real estate abroad are foreign laws (cited by 45% of Hong Kong respondents) and a lack of local market knowledge (44%) along with the challenge of managing tenants (44%).
Transaction costs and currency volatility
In South Africa, the cost of foreign transactions (chosen by 47%), tax considerations (46%), and fluctuations in currency (44%) top the list of barriers to offshore investment. According to George Radford, Director and Head of Africa, these are in fact primary reasons to invest abroad; “It’s in times of economic uncertainty that we notice more and more people investing in stable asset classes such as property in safe-haven cities such as London and Melbourne. Many of our clients are liquidating their share and local property portfolios in favour of this option – ensuring they have fixed assets and that they are not solely Rand-asset based.”
The UAE has the highest proportion of investors with money in property overseas (13%), yet similar considerations prove to be potential barriers. While tax considerations are the most important (chosen by 41% of UAE respondents), not understanding laws abroad (33%), difficulty in finding trustworthy managing agents (32%) and not understanding markets abroad (30%) coupled with political instability (30%) are also chief concerns.