Diversify Your Investments They Say, Overseas Property They Say..

Singaporeans are among the most financially savvy individuals, many of us have set aside money for investment plans, or are at least aware of the options available out in the market. Property investment is one of, if not the most, popular investment vehicles in Singapore due to how resilient our real estate market is - that goes without saying. At the same time, property investment is also something that isn't for everyone due to the high entry cost involved. Plus, those people looking for a second property might find it even harder with all the taxes involved. Perhaps that's the reason behind the strong growth behind many turning to look at overseas properties.

Definitely a strong option for those who are financially capable as the cost involved varies and can be quite hefty depending on what you go for. There are many types of property one could choose when looking into investing, find out more about the different types of property you could invest here. But owning more than one property in Singapore, you are liable for the Additional Buyer's Stamp Duty (ABSD) which could prove to be quite a deterrent for anyone looking to buy more properties here. Then again, there are ways to own more than one property without having to pay ABSD, you can find out more in this article.

There are several reasons why Singaporeans are looking abroad in search of their investment property:

Getting Priced Out Locally

To put it crudely, Singapore properties are expensive, albeit an extremely safe investment. Singaporeans are able to buy properties overseas at a fraction of what they would have to pay here and still receive very good returns at the end of their investment tenure.

What is ABSD?

The ability to own more than one residential property without even worrying about ABSD. ABSD is only taxable to residential properties in Singapore and it does not affect the ones you own abroad.

Limiting Threshold

Due to Total Debt Servicing Ratio (TDSR), Singaporeans are not allowed to exceed 55% of their monthly income when servicing monthly repayments. Unless you make a boatload of money every month, you may find it difficult to service more than one housing loan in Singapore.

So now you are also tempted to buy an overseas property but are unsure where to start? Don't worry, let me give you some tips when looking at overseas properties.

1. Population

The population of the city you invest in has to be substantial to support the demand for rental or when you eventually want to let it go and sell it for profit. With a population of more than 2.8 million, it is the second-largest urban city outside London.

A Census report released by the Greater Manchester Combined Authority (GMCA) shows that its population grew by 6.9% from 2011 to 2021. This is higher than both England (6.6%) and the North West (5.2%).

2. Connectivity

Manchester is in a position that is strategically connected both globally and locally. The Manchester Airport is the busiest airport out of London, serving more than 28 million passengers in 2023. There are also two primary railways that connect you to London in just two hours. There are also works to link cities in Edinburgh to London via high-speed rail by the end of 2024. And you know deep down that transportation is king, the ability to get around seamlessly is definitely a HUGE PLUS POINT!

3. Business

Just by hearing the name Manchester, I bet many of you think about football, especially with the greatest club in the world Manchester United (biased pov), and other not-as-huge clubs like Manchester City. Manchester is a football city with two major teams in the Premier League, look at the impact of the league on the economy.

Source: Premier League

Apart from football, the economy in Manchester grew to 78.7 billion in 2020, up by an impressive 39% from 53.89 in 2010. Key sectors in Manchester include creative and media, advanced manufacturing, digital and technology, life science and healthcare, and more. That is why more than 2,000 foreign owned companies chose to set up shop in Manchester.

Another notable area of transformation in terms of business was the Noma transformation. Named the second CBD of Manchester, it is now home to 100 million Cooperative Group headquarters. In a report titled NOMA: The Economic and Story So Far, NOMA generates 380 million in Gross Value Added with 5,500 people working in the area.

4. Transformation

Transformation plans for a city are always exciting as it creates new areas for living and further extending the business capabilities. This would create both new job opportunities and housing needs for people in the area. So when a transformation project as big as Manchester's Forward to 2025 which started in 2016, you are expecting a lot of huge changes and everything translates to increasing the demand for housing.

5. Supply & Demand

The laws of supply and demand are prevalent in any housing market. When the supply is low, the demand rises, and when the supply is high, the demand falls. The higher the demand, the higher prices tend to be as well. After the riots in Hong Kong between 2019 - 2020, many of their citizens fled to the UK, and Manchester is a top destination for them - which contributed to the demand for housing there.

Looking at the supply of residential developments in England, it has drastically fallen over the years.

It has also been forecasted somewhere in 2020 that the next five years would see an additional undersupply of 500,000 homes in the United Kingdom.

(Source: JLL)

On top of the shortage of residential homes across the United Kingdom, there is a real demand for housing in Manchester for the employees of businesses and students. There are 120,000 students across five universities within the Greater Manchester region with more than half of them staying in the city to work.

6. Upsides & Risk

One of the most important pointers before buying any property is to ascertain the potential upsides and risks involved.

(Source: EY)

Looking at the economic and employment growth forecast for 2024 - 2027, we can see that Reading and Manchester lead the way for abundant growth. The forecasted growth for Manchester even outpaces London.

Greater Manchester is also part of the North West region that is slated to grow twice as fast as London in terms of residential property price growth over the next five years.

Investing overseas might seem like an attractive option for many, but at the end of the day your due diligence is extremely important to avoid any adverse situations. When in doubt, it never hurts to consult an expert on the matter. If you are interested in properties in Manchester, then you gotta stay tuned as we dive deeper into the properties there and also what are some of the costs involved.

Buying overseas properties can be a rewarding venture if you approach it with careful consideration and planning. Our Deputy CEO, Kelvin Fong, has always adopted a prudent approach when it comes to property investment. He recently flew to the UK to conduct an in-depth research on the stability and safety of the market. What surprised us was that he ended up purchasing a unit in an upcoming development.

Hear from the man himself as he shares some of the safe strategies, including the ones mentioned above in our upcoming seminar. This is one not to be missed as he shares about building long-term wealth. So, what are you waiting for? Register here today!

Views expressed in this article belong to the writer(s) and do not reflect PropNex's position.