What you need to know before buying property overseas

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Published 2 months ago

Buying property is an interesting option for expats looking to make a long stay overseas. However, various factors including real estate prices, and supply and demand, have to be taken into account before taking such a big step. Today, most of the top expat cities are unaffordable regarding real estate. Whether you've chosen to move to Europe, Asia, North America, or Oceania, here's an insight into the global real estate trends according to the UBS Global Real Estate Bubble Index 2018.

Asia

real estate in Hong Kong
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Given the standard of living and the cost of living, it comes as no surprise that Hong Kong and Singapore are the most unaffordable cities in Asia regarding real estate. Since 2012, there was a 10% increase in property prices in Hong Kong. While prices have almost doubled since 2008, a 15% rent price increase was also noted during the same period even though income remained stable. Local authorities have initiated measures aiming at regularising property prices; however, the strong demand and speculations help in maintaining the upward trend. Today, the demand is much higher than property supply – which probably explains rising prices. Even highly skilled and well-paid professionals find it hard to buy property in Hong Kong. In short, you have to work and save for at least 22 years to be able to buy a 60 square meters flat in an Asian metropolis.

In spite of a recent 9% rise in property prices, Singapore's real estate market is deemed to be fair enough. Also, there's a 5% drop compared to 2011. However, the price-income ratio remains uneven. In the long run, the real estate market looks promising even though vacancies were few in mid-2018. Newly introduced regulations including additional stamp duties are likely to discourage real estate investment – which should have an impact on property prices by the end of the year.

In Tokyo, there was a 17% rise in property prices since 2015. In the rest of the country, however, apartments and houses are more affordable. In general, a highly skilled employee in the services sector has to work for 11 years to be able to buy a 60 square meters apartment in Tokyo.

North America

 Toronto, Canada
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If you're planning to move to North America, or more specifically to Canada, buying property may not be as simple as it seems. World famous for its quality of life and standard of living, Toronto is another unaffordable city regarding real estate. Property prices have almost doubled in the past five years even though they are now stabilising. One of the reasons accounting for this downturn is more strict control coupled with taxes on foreign purchases and vacant apartments. However, the current trend can be reversed by a short-term depreciation of the Canadian dollar. Property is expensive in Vancouver also. While prices have doubled in the past 12 years, there was a 5 to 7% rise in rent prices in recent months.

Needless to say that major US cities such as New York, Los Angeles, or San Francisco, remain inaccessible. However, Boston and Chicago are becoming more and more affordable. Since 2012, there was a 25% increase in property prices in New York while a 15% increase in rent prices was observed due to inflation. On the other hand, there was a mere 10% increase in average income. Nevertheless, a slight decrease in the demand led to a 2% decrease for the first time in years. Various factors including a decline in immigration rates and State and federal ownership taxes account for these changes. Famous for its luxury apartments, Manhattan recently experienced a 5% drop in property prices during the past few months, even though it remains affordable. To buy a property a 60 square meter flat in Manhattan, you must have worked for at least ten years.

In Los Angeles, real estate prices are up 40% since 2013, including a 6% increase over the past year. Many factors such as the city's economic prosperity thanks to vibrant manufacturing, media, technology, and recreation sectors, account for the growing demand. Rising prices are even more surprising in San Francisco, an attractive city for foreign professionals, entrepreneurs, and investors. In the last six years, an 80% rise in property prices was observed in San Francisco. Also, during the past year, there was another 12% rise.

If you still wish to buy property in the USA, consider cities like Boston and Chicago. Boston is much more affordable than major financial centres in the US in spite of an overall 20%¨rise in property prices since 2015. Also, there was a 15% increase in rent prices during the same period. In Chicago, there was a 15% increase since its lowest point in 2013.

Europe

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Rising property prices in Europe were driven by a significant increase in wages and less borrowing in recent years. Except for Milan due to economic and political uncertainty, most attractive European cities remain unaffordable regarding real estate. In Munich, for example, prices have nearly doubled in the past decade while a 9% nominal increase in rent prices was noted last year. As a result, the demand remains much higher than the supply. Therefore, to buy a 60 square meters apartment in Munich, you will have to work for at least eight years.

Amsterdam is among the most expensive cities in Europe due to a recent 12% rise in property prices. It's worth noting that since 2013 there was a 60% rise in property prices across the country. On the other hand, there was a significant increase in income during the same period – which probably explains the upward trend in purchases. Potential buyers in Amsterdam are also eligible for financial support. London also remains an unaffordable city in spite of a recent 5% decline in property prices. To buy a 60 square meters apartment in the city centre, you will have to work for at least 15 years! In London, buyers also face high stamp duties on luxury homes and buy to let property. Elsewhere in the UK, first-time buyers can benefit from government plans given more affordable prices.

A growing population mainly accounts for the expansion of the real estate market in Stockholm. In the past decade, there was a 60% rise in property prices in the Swedish capital city. However, a 7% drop was noted during the past few months, and this is likely to make Stockholm even more appealing for property investment.

Oceania

real estate in Sydney
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As one of the top expat destinations, Australia is well known for its affordable cost of living and quality of life. Sydney, on the other hand, has become the most unaffordable city in Australia due to rising property prices, so it's better to look elsewhere if you're keen to invest in real estate in the country. Over the past five years, there was a 50% rise in property prices along with a slight increase in rent prices. The Australian government recently introduced a vacancy fee following the increase in land tax surcharge to curb the foreign demand.