Foreign property purchase: Uncle Sam's a calling!

By The Folks @PropTalk - September 10, 2014 1 Comment

The real estate market in the United Stateshas become one of the latest contenders for a slice of Singaporean investors’ growing interest in overseas properties, joining the ranks of traditionally popular markets such as Malaysia, Australia and Britain. 

In recent months, Singaporedevelopers, including Keppel Land and PontiacLand, have flocked to the US, taking stakes in American projects as they seek alternative sources of revenue amid a lacklustre market back home. 

On their part, USdevelopers, including Millennium Partners, have also set up shop here, in an attempt to attract more individual investors for their properties in the States. 
“We first came to Singapore and a few other Asian cities in 2009 to market our project Millennium Tower in San Francisco … We’ve seen interest grow and our hope is that it will continue to grow; that’s why we’re here,” said Mr. Richard Baumert, a partner at Millennium Partners. Mr. Baumert was in town to kick-start marketing for the company’s latest project - Millennium Towerin Boston. 
Overseas properties are becoming increasingly popular with Singapore investors, who face tough property curbs and high entry prices at home. The Monetary Authority of Singapore said Singaporeans poured S$2 billion into foreign properties last year based on deals done by real estate agencies here, a 43% increase from the S$1.4 billion invested in 2012. And analysts said this figure could increase further. 
Mr. John Stinson, Cushman and Wakefield’s executive managing director of capital markets in the Asia-Pacific, said: “There has been an overall surge in interest from the Asia-Pacific in investing in the United Kingdom, Europe and the US for almost two years. This trend has really gathered momentum from Singapore and other parts of South-east Asia this year. Many investors with portfolios highly concentrated in Singapore… are executing strategies to diversify offshore. 
“The UShas reached the top of many investors’ target lists of offshore country targets. The markets showing the most appeal have been New York, San Francisco and Los Angeles ... The US markets are generally coming off a low base in almost every sector; interest rates are historically low and the US dollar has again become a safe-haven currency.” 
Mr. Sean Tan, general manager of real estate portal iProperty, agreed that the US is emerging as a viable investment destination, especially among investors who are seeking a diversified portfolio, but noted that its popularity still pales in comparison with that of Malaysia, Australia and the UK.
“As with any investment, there are risks. The USis so far away; investors may not be familiar with the market so they may buy into areas that are not so good … but cities such as San Francisco and Bostonare not bad as their economies are quite promising.” 
Mr. Tan also said overseas developers are drawn to Singaporefor its status as a regional hub and gateway to affluent individuals in Asia, a sentiment that Mr. Baumert shares. 
“We have two more projects coming up after this one, so we thought we should just set up an office here. We started in summer, so that’s around June. From a branding perspective, it also helps to tell people that we have a presence in Singapore,” said Mr. Baumert.
Source: CNA

Coincidentally the wife and I have been exploring the US property market for the past year. Property prices in some of the US cities are still very attractive currently, with some purportedly selling at "distressed" levels. And if you are looking at properties outside of the major cities like New York, Boston and San Francisco, the purchase quantum can be rather modest - we are talking about the US$100K range.

However, we are not yet comfortable enough to put money in the US market due to the following reasons: 

  • The US market is still one that is relatively "undeveloped" with Singaporean buyers compared to traditional markets like UK, Australia and even New Zealand. It is until recently that you find US projects/properties being marketed in Singapore but this is still few and far in between. As such, the level of education/information on US properties is still low, which raises the level of uncertainty and risks. 
  • Although there are supposedly bargains to be had in cities such as Houston or Detroit, these are cities that we have heard about but totally unfamiliar with - especially in regard to the property sector. So although the cost of entry may be low, the prospects on rental yields and capital appreciation may be similarly low. This is not helped by the horror stories of illegal squatting or even burglary (dismantling of fittings and furnishings within the property) that we have come across from the internet while doing our research. 
  • The complex nature of US taxes that one has to navigate through for property purchase and sale are supposedly rather mind-blogging. We have not looked into what/how much taxes one needs to pay for purchase and subsequent resale yet, but we have marketing agents telling us that they themselves are confused by the myriad of taxes that are payable.
So with US developers such as Millennium Partners (and hopefully more to follow) setting up shop here in Singapore, the wife and I are looking forward to be "better educated" on the US property market.

1 comment to ''Foreign property purchase: Uncle Sam's a calling!"

  1. Even if you have already purchased a commercial real estate property, it is important to keep in mind that it is a long process.