We take a look at a few popular options for property investments and what you can expect in terms of returns on investments (ROIs) in 5 countries , namely Singapore, Malaysia, Hong Kong, China and Thailand:
Singapore
One of the major two financial hubs in Asia – the other being Hong Kong - has long been touted as the go-to place for businesses to open primarily due to it being a tax haven. Residents also enjoy extremely low crime rates with a stable political environment. That being said, costs of properties in the city-state are extremely high, as is the cost of living. The issue with renting out an investment property is that yields are not commensurate with prices. One can expect to part with a premium sum for accrual and receive returns of approximately 2.5 percent per annum. With the Budget 2018 legislating higher stamp duties, the country should experience a slowing down of property accrual - those that purchase will be forced to raise rents to make up for increased costs.
Malaysia
Although rental yields have dropped to a reasonable 5%, Malaysia’s property market suffers when it comes to property appreciation. The factors affecting rental is primarily due to the country being made up of vast land with low population density. The fact that the market has experienced a considerable slowing down of overall rentals reveals that there is an element of risk involved in parking money in the real estate industry.
Hong Kong
As is the case of Singapore, Hong Kong is a safe haven and secure market for investors to park their assets in. Hong Kong’s rental yield currently lies at a bit above 2 percent. The low yield is primarily due to extremely high property prices, ranked as the most expensive housing market in the world for seven consecutive years. This in turn reduces rental yield percentages considerably, leaving little in terms of net yield after deducting fixed expenditures such as maintenance costs.
China
The country’s tier 1 cities (Beijing, Shanghai, Guangzhou and Shenzhen) have seen considerable drops in rental yields over the last several years. Figures sit at less than 2 percent, partly due to the cultural belief that one should own their own home. Renting is not an option for most. With the Chinese property market working predominantly on the leasehold model and raising of minimum down payments as well as tighter liquidity measures on mortgages, more and more citizens are looking for alternatives for property accrual. This will slow down the market considerably, further pushing down rental yields due to oversupply and under demand.
Thailand
With its strong economy and booming tourism industry, Thailand proposes enticing property investment opportunities with favourable ROIs, and rental yields between a healthy 5-8 percent range. The country finds its appeal in part through a relatively inexpensive cost of living, a favourable tax structure and high standards of medical services.
The nation is currently undergoing major changes in terms of its infrastructure, with the Thai government investing large amounts of capital towards projects that will translate into appreciation in property values. Another draw is the much lower median prices than other major cities, offering much more opportunities and broader options for housing.
With the two main reasons for investment property accrual being overall appreciation and rental yield, potential investors should always consider a basket of factors when deciding where to park their money. As always, considerations such as surrounding infrastructure, location, political stability as well as the overall price-to-rent ratio of the property should be taken into account before making one of the biggest purchases of your life.