The uncertainties in growth rates, taxes and costs are often the key considerations for foreign property buyers. Through the first ever Global Tax Report produced by Knight Frank and Ernst & Young, foreign buyers can now visualise the buying, holding and selling costs in key global residential markets better.
Knight Frank Asia Pacific Head of Research, Nicholas Holt highlights that investors should err on the side of caution, and take into considerations the market, currency, management and liquidity costs, and risks, including the tax implications over the lifetime of their investment.
The report shows that despite the introduction of the Additional Buyer’s Stamp Duty (ABSD), the property and tax costs in Singapore is comparable, or lower, when compared with other popular property investment destinations. Comparing Singapore with gateway cities London and Sydney, Singapore offers the lowest property costs but the highest tax costs for a starter US$1 million property, however, Singapore offers the lowest property and tax costs when applied to a US$10 million property
The performance of the luxury residential market in 15 key global cities was measured over a one and five-year period (2010-2015), taking into account variables that includes the currency shifts, wealth flows, tax changes and fluctuating levels of supply and demand.
Other findings include the weak pound in 2008-2009 that further boosted London’s appeal that coincidentally happened during Asian economic boom. Furthermore, the cooling measures introduced across large parts of Asia plays a part in the holding back of prospective foreign investors to help boost the domestic economy.
However, investor sentiments can be more complicated than just favourable numbers, as an observation made by Knight Frank Head of Residential for Asia-Pacific Sarah Harding was that despite new property taxes being introduced in the UK and Australia, they have not quashed foreign appetite for properties in London and Sydney.
Currently, the Japan market’s weak currency provides them with a competitive edge, as is the potential growth that some investors are banking on. However, Japan remains very much a “closed” country, culturally, and that would need to change before we see any property rushes in the market.
Another key takeaway from the report was policies that served primarily as barriers for foreign buyers in the residential luxury homes market may not necessary affect investors’ decisions, as they may feel more comfortable putting their money into markets that offer them more security and stability as opposed to emerging property markets without roadblocks. According to Ms Sarah Harding, the main factors that play a big part in their decision include education, security, lifestyle and capital appreciation.
Prices of private non-landed homes in Singapore’s Core Central Region (CCR) slipped 2.5% last year after a 4.1% drop in 2014, based on data from Urban Redevelopment Authority. Nearly 25,000 units island wide remain unsold at the end of 2015, with 26% located in the CCR, and while the government has reiterated its stance on the cooling measures, Ms Alice Tan did add that the next three to six months will be crucial for the authorities in re-looking at the measures as more data and results of the current property landscape are released.
You may also download the report here: http://www.knightfrank.com.sg/research/global-tax-report-2015-3379.aspx