$JLL
Here LTN looks at 6 real estate Hot Spots to invest in: London, New York, Sydney, Dubai, Tokyo and Kuala Lumpur.
These cities continue to offer valuable buys and have good growth potential.
New York
Rental yield: 3–4 %
12-month price change: 6.7 %
Current mansion tax: 1%
Agent transaction cost: 6-8%
Stamp duty: 1.5-6%, depending on financing
Last year, some 42,000 property transactions took place, with a value of around $37.5-B and a median sales price at $480,750.
But investors should not hope to make quick returns here and must be able to hold on for at least 5 to 8 years, if they expect good returns.
While most sales are to local buyers, foreign sales to the Chinese nouveau riche are said to be increasing. Last year, Chinese buyers reportedly pumped some $22-B into the US property market, with a significant amount invested in New York.
Frank Percesepe, regional senior vice-president of New York real estate brokerage Corcoran Group told New York Magazine in April. He adds: “The best is yet to come.”
London
Rental yield: 3-4 %
12-month price change: 7.4 %
Stamp duty: 5-7%
Capital gains tax: 18% or 28%, depending on individual’s tax rate
Agent transaction cost: 2-3%
“London is the most transparent of cities to invest in and, therefore, an easy place to buy and sell property,” says Doris Tan, director of international residential property services at Jones Lang Lasalle Property Consultants (NYSE:JLL) “It is a very interesting market and, although it is relatively expensive, there is no shortage of buyers from around the world.”
In the first quarter of this year, homes in the prime areas of London saw their biggest rise in values. Buyers paid a 34% premium in areas like Kensington and Chelsea, according to news service provider Property Wire.
Some home owners slashed selling prices, for fear of falling values in the event of a Labour-led government and a proposed mansion tax. But now that the Conservatives are back in power, prices are expected to rise again.
Tokyo
Rental yield: 4-5 %
12-month price change: 4.5 %
Capital gains tax: 30% for properties sold within five years of purchase
Acquisition cost: 4-6% of purchase price
Property tax: 1.7% of appraisal value
Stamp duty: 200 yen to a cap of 480,000 yen, depending on price of property
Although prices of new apartments are expected to continue to rise for the rest of the year, the weakening Japanese Yen has attracted foreign buyers to the country’s property assets. Residential properties, even in Tokyo, are still priced at about half their peak values, which are considerably lower than prices in Singapore and Hong Kong.
Moreover, they are freehold and there is no restriction on foreign buying.
Financing for up to 70% of valuation is available from several banks.
Last year, the average price of new apartments in greater Tokyo reached JPY 50.7-M, the highest since 1992’s average of JPY 50.66-M. It looks like this trend will only persist, as Japan’s Real Estate Economic Institute anticipates “the recovery of the property market in central Tokyo to become even stronger”.
The Olympics, to be held for the 2nd time in Tokyo in Y 2020, is expected to give the property market a further boost, and some 6,000 units are expected to be made available after the Games, almost all in the Bay area where most of the venues will be.
To gain a better understanding of the Japan property market, prospective buyers are advised to attend seminars such as those held here by Sumitomo Realty & Development Co, one of Japan’s largest property developers.
Dubai
Rental yield: 5.5-6 %
12-month price change: 2.6 %
Real estate broker fee: 2% of purchase price
Registration fee: 4% of property’s value
Buying off-plan: 10-15% deposit
Title deed: AED250
For those who want in on the Emirate’s properties, now is the time. This is especially after measures were enforced to cool down an overheated market to avoid a repeat of the Y 2008 property bubble when values dropped 65%.
Despite reports of a softening economy, what with falling Crude Oil prices, currency issues (the dirham is pegged to the USD), stricter borrowing rules and doubling of property registration fees – investors who are willing to bite the bullet are likely to find bargains at good value and yield rental returns that are better than London’s.
Dubai’s prime residential property market is relatively inexpensive by international standards, according to Knight Frank’s 2015 Global Cities report which predicts property trends. It adds: “This, combined with the fact that the UAE economy and employment continues to grow strongly, suggests that the prime residential market in the emirate is likely to see ongoing expansion despite new market controls, such as the doubling of transfer fees to 4% and newly introduced mortgage caps.”
These new rules include foreigners being able to borrow only 65% for residential property worth over 5-M Dirhams, which is a stark contrast to the boom period of Y 2008 to 2009 when some banks offered 90% finance.
Lenet Asatourian of Dubai real estate brokerage ERE Homes said, “This year, we are getting more enquiries than we did in the past 6 months… Buyers who held off last year as prices surged are coming back. To me, that signals a maturing market.”
Kuala Lumpur
Rental yield: 5-8 %
12-month price change: 0.7 %
Stamping, adjudication and search fees: RM180
Lawyer fees: 0.4-1%
Capital gains tax: 30% of profit for properties sold within three years of purchase
Stamp duty: 1-3%
“The weak Malaysian dollar makes buying into Kuala Lumpur cheaper and easier,” says Doris Tan of Jones Lang Lasalle Property Consultants. “Banks are also keen to lend on Malaysian properties, so borrowing is not a problem.” At around 4.5% as at the end of last year, mortgage interest rates are at a historic low.
While most home prices in Malaysia are still below the pre-Asian crisis Y 1997 marks, housing prices in KL have increased more than 75% since Y 2005 and are almost at their pre-crisis levels.
According to Malaysian property consultants C H Williams Talhar & Wong, the government’s Economic Transformation Programme has helped to increase the demand for luxury condominiums in the Klang Valley, which caters mainly to foreigners.
The Singapore-Kuala Lumpur high-speed rail, which is targeted for completion in Y 2020, is expected to give another boost to the KL property market as traveling time between the Malaysian capital and Singapore will be substantially reduced.
This makes a good investment opportunity. The downside is rentability may be low, due to lack of demand from foreigners and expatriates as KL is not a major city.
Sydney
Rental yield: 3-4 %
12-month price change: 11.6 %
Agent’s commission fee: 2-3.5%, depending on location of property
Stamp duty: 1.25-7%, depending on property value
Sydney is no longer a cheap place to buy a home.
While prices stagnated in cities like Perth, Brisbane and Adelaide, the Sydney real estate market saw residential property prices soar 6.5% last year. The city’s house-price-to-income ratio is higher than places like London, New York or Tokyo.
The medium sale price of residential units last year was over AU$1-M in 7 of 23 Sydney suburbs, with the median in Palm Beach, where Sydney’s rich and famous play, being AU$2.25-M. The lowest median price was in Brooklyn at AU$716,000. Judging by recent sales by Stamford Land in Sydney, there is no sign of interest relenting.
Before buying rea lesteate in Australia, remember that foreigners can sell their properties only to Australian citizens and permanent residents.
Mortgage rates are fairly low too, and likely to decline further till Y 2017.
Stay tuned…
Paul Ebeling
HeffX-LTN