Overseas properties – Invest wisely

Buying a home overseas might seem like a good way to reap profits, but there are also many dangers which may derail your straight track to financial profits.

Singaporeans have always been one of the bigger foreign buyers of properties in Malaysia, and especially in Johor, Kuala Lumpur and Penang. But the Monetary Authority of Singapore (MAS) and Council of Estate Agencies (CEA) has warned that a supply glut might be looming, especially in some of the newer regions under Iskandar Malaysia. The Advertising Standards Authority of Singapore has also announced their plans to implement new guidelines for property investment ads by the end of the year.

Under MAS’ Total Debt Servicing Ratio (TDSR) Framework, banks and lenders are required to conduct stricter checks on customers who wish to apply for loans. This move has already put many local properties out of buyers’ affordability range, pushing their sights further to properties outside the country. But as the number of properties in Iskandar Malaysia increase, buyers are finding an increasing number of options to buy but perhaps not necessarily a corresponding number of buyers willing to purchase on the resale market, or even to rent for that matter.

Horizon Hills in Nusajaya, Johor, Malaysia.

Horizon Hills in Nusajaya, Johor, Malaysia.

Unless the overseas property was purchased as a second home or with occupation in mind, flipping properties overseas is a delicate and time-sensitive issue. In Southern Johor for example, where more developers are coming up with new private residential and mixed-use property options, investors may be drawn to the low prices without consideration for further value of their properties. The opportunity costs and likelihood of value appreciation in these properties need to be clearly explained to potential investors. The CEA already has guidelines in place to explain the risks involved in overseas property investment, and also provides sources to inform investors on rules and regulations for foreign ownership and properties and dispute-resolution avenues. Investing in overseas property comes with its fair share of promises and dangers, thus prior market research and a sound understanding of one’s own finances will help hedge against unexpected losses.

There are avenues to secure advice and assistance, especially with upcoming International Property Investment Exhibitions and estate agencies out there specialising in foreign investments in specific regions. As always, doing your homework will ensure a safe and stable journey ahead.