Your Guide to an Overseas Property Loan
The local property market has cooled down in the last year or so after the Singapore government introduced a number of cooling measures to moderate demand for residential properties. The challenging local market conditions have thus spurred buyers to look abroad.
According to figures released by the Monetary Authority of Singapore(MAS) in its Financial Stability Review 2014 report, the value of overseas property purchases transacted in Singapore rose from S$1.9 billion in 2012 to S$3 billion in 2013, before moderating to S$1.1 billion in the first six months of 2014.
Amongst the buyers of overseas properties, UK, Malaysia and Australia were the top three destination they bought into, accounting for 91 per cent of the total transactions by value . Singapore was also the top Asian outbound real estate investor in 2014, snapping up US$11.9 billion worth of properties across the globe.
If you are thinking of investing overseas, you will need to think about what the financing options are. Similar to buying a property locally, the total debt servicing ratio(TDSR) framework applies to overseas property loans as well.
Obtaining an international property loan
While not all banks here cater to an international property loan, some of those which offers them include, UOB, DBS and ANZ.
Other than the loan itself, remember to include other cost considerations such as legal fees, valuation fees, property tax, capital gains tax, insurance premiums and building management fees.
What to note before investing overseas:
- Be mindful of exchange rate risk, loan currency and interest rates of the loan
- Compare loans from both local and overseas bank
- Your rental yield may be exposed to currency risks; can you hedge it?
- Keep yourself informed of the country’s property rules and regulations – this can affect your yield with regards to how you exit your investment later
- Make prudent checks on the property developer and their reputation
Buying a property overseas can take on substantial risk due to unfamiliarity with the market and foreign regulations. It is best to check the background of the developer for the property and the marketing agency as well due to the prevalence of scams. Having said that, investors who have done their due diligence and understand the pros and cons of investing in overseas properties may find it a fulfulling proposition.
If you re looking to fund a purchase of a property in Singapore or abroad, then take a look at our Home Loan comparison, to help you make an informed comparison of the best Home loans in Singapore.