Where we’re not investing in 2018

12 July 2018

ANTI_GREO_2018

While we often get asked about which markets we view as having the greatest potential, we also commonly get asked about the markets we are not currently investing in, and how we come to the decisions about where we invest. We generally choose our markets in a similar way as how we recommend to our clients- we look at key factors and decide how these factors will affect our investment. These factors make a property market right, or wrong, for us at a specific time.

When choosing an international property market to invest in there are several key factors that investors must look at to decide whether investing will make sense for them. The strength of the economy, political situation, availability of mortgages for non-residents and transaction costs can all be important factors to look at when choosing the market that is right for you.

The following markets are areas we have studied closely and have decided that they are not the right markets for us at the moment, although we will continually monitor them for investment potential in the future, should the noted key investment issues change.

Europe

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  • Amsterdam, Netherlands: 1. High VAT applies to the transfer of new build property. 2. Very tight supply.
  • Copenhagen, Denmark: 1. Foreign buyers are restricted by law from buying residential property in Denmark unless they are taking up permanent residence.
  • Costa Blanca, Spain: 1. Primarily focused on luxury properties, villas in particular. 2. High ticket value with an average price of EUR1.8 million.
  • Geneva, Switzerland: 1. Strict restrictions on foreign buyers.
  • Helsinki, Finland: 1. Weak price growth performance.
  • Oslo, Norway: 1. Tight mortgage regulation for foreign buyers. 2. Housing prices have been dropping since early 2017. 3. Huge supply in the pipeline.
  • Rome, Italy: 1. High transaction cost for new builds (16%).
  • Stockholm, Sweden: 1. Lack of attractive mortgage options for foreign buyers. 2. House prices have continued to decline since mid-2017.
  • Uppsala, Sweden: 1. Lack of attractive mortgage options for foreign buyers. 2. The housing price in Sweden slumped in 2017, the most since 2008.
  • Vienna, Austria: 1. Foreign Buyer Restrictions (Non-EU citizens).
  • Zurich, Switzerland: 1. Strict restrictions on foreign buyers. 

Asia

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  • Abu Dhabi, United Arab Emirates: 1. Weak labour market. 2.  Large supply in the pipeline- 13,000 units scheduled to enter the market by 2019. 3. Price declined by 13% year-on-year in 2017 Q3, rent fell by 13% year-on-year in 2017 Q3. 4. Tightening of housing allowances.
  • Bahrain: 1. Economy over-reliant on the oil industry.
  • China: 1. The property acquired by foreigners must be for self-use only. 2. Foreign buyers must have been living in China for over 1 year.
  • Dubai, United Arab Emirates: 1. Huge supply in the pipeline - 570,000 units could enter the market by 2020. 2. Negative price and rental growth: prices declined by 4.1% year-on-year in 2018 Q1, rent fell by 6.5% year-on-year in 2018 Q1.
  • Hanoi, Vietnam: 1. Lack of attractive mortgage options for foreign buyers. 2. More than 47,000 new units are expected to be complete by the end of 2018.
  • Ho Chi Minh City, Vietnam: 1. Lack of attractive mortgage options for foreign buyers. 2. Up to 50,000 new units are scheduled to hit the market by end of 2018.
  • Hong Kong, SAR China: 1. High transaction cost for foreign buyers - extra 15% tax of the purchase price in addition to the standard stamp duty tax. 2. Very low rental yields: below 3%.
  • India: 1. A foreign national of non-Indian origin, residing outside India, cannot purchase any immovable property in India. 2. Low ranking in terms of ease of doing business (100th).
  • Istanbul, Turkey: 1. Political and economic uncertainly.
  • Manila, Philippines: 1. Lack of attractive mortgage options for foreign buyers.
  • Seoul, South Korea: 1. Lack of attractive mortgage options for foreign buyers.
  • Singapore, Singapore: 1. High transaction cost for foreign buyers- an additional 20%.
  • Tel Aviv, Israel: 1. Low ranking in terms of ease of doing business (54th). 2. Very high house prices: As of 2017, the average price in prime central locations is USD14,700 psm; while average prices in the wider Tel Aviv area is USD774,000.

Want to know where we are planning to invest in the coming year? Our 2018 Global Real Estate Outlook, or GREO, details all of the cities that we have decided are good investments for the current year.

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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