Singapore and Hong Kong’s property market will do well in 2023 for similar as well as different reasons.
For Hong Kong, a place where my family is originally from and where I spent over 20 years of my career, I feel like the market is coming from a low base of price, sentiment, and liquidity as a result of many reasons that we all know about.
I think a small uptick in sentiment will get local buyers to become active again, and the political overhang during COVID seems to have been lifted with the new pro-active administration.
At the end of the day, Hong Kong’s competitive strengths is from its long history of promoting free trade and open markets. Capital markets will pick up, foreign companies and executives will move back, providing support for the overall property sector.
Singapore’s reputation has benefitted greatly from having a systematic approach to dealing with COVID.
Its pragmatic and meritocratic approach to running the country is its core strength, and the world is taking notice.
It’s no secret how well Singapore has created an environment for top overseas talent and families to be attracted to safety, ease of travel, good schools, true multi-cultural society, attractive living options, and great food!
With recent programs to attract top foreign talent and family offices, the top end of the real estate market has been very hot, with new record prices being mentioned almost every day. This will continue to support the real estate market, and now with the countries all opening up, prices will continue to remain strong as affluent families look for options to move here – company setups, employment, education, and at the very high-end, setting up family offices.
Prices for high-end residential homes in Singapore are around $3,000 psf which is really what Hong Kong was in the late-90s, so there is a considerable amount of upside for Singapore real estate if that is how you want to look at the 2 markets.
My personal opinion is the competition portrayed often by media between Hong Kong, and Singapore is unwarranted. Once all countries in Asia open up in earnest, Hong Kong and Singapore will be connected more so than ever and will part of one ecosystem with China, in my opinion.
The custodial and wealth management business will continue to move to Singapore, and families will move here and take advantage of the strong school systems and safe environment to raise a family.
Meanwhile, Hong Kong will still be the centre for capital markets. The biggest market cap companies in Asia ex-Japan are Chinese companies, and naturally, they will be listed in Hong Kong given that the HKD is a freely traded currency as China’s capital account is still closed, all things equal. However, Singapore is at the cutting edge of many industries like healthcare and medical research, blockchain, education, and much more.
Real Estate Capital Gains Tax - A Global Comparison
This week, in our "Wealth Planning" series, we analyse and compare the capital gains tax for the major real estate investment destination countries. This is a follow-up article from last week's "Global Stamp Duty Comparison."
This week we take a closer look at the real estate market and the capital gains tax in 13 countries around the world:
Australia France Japan Spain USA
Canada Hong Kong Portugal Thailand
Dubai Italy Singapore United Kingdom
What is Capital Gains Tax?
Capital gains tax (CGT) is a tax levied on the profit from selling an asset, including real estate. The rate for foreign national investors in 2023 can vary between countries and may also depend on the specific circumstances of each transaction.
Global Comparison
Here's a list of Capital Gain Tax for the countries we offer mortgages to:
Australia: In Australia, the CGT rate for foreign nationals is determined by the investor's marginal tax rate, which ranges from 0% to 45%. A discount of 50% is available for individuals and trusts if they have held the asset for more than 12 months.
Canada: In Canada, 50% of a capital gain constitutes a taxable capital gain, which is included in the corporation's or the individual's income and taxed at ordinary rates.
Dubai: There is currently no personal income tax in Dubai. As such, capital gains tax is not imposed on UAE nationals or resident individuals.
France: In France, the CGT rate is 30% plus exceptional income tax for high earners at 4%.
Hong Kong: Hong Kong does not have a CGT on real estate.
Italy: Capital gains are subject to separate taxation at 26% (normal PIT rate applies in certain instances).
Japan: In Japan, gains arising from the sale of real estate property are taxed at a total rate of up to 39.63% (30.63% for national tax purposes and 9% local tax), depending on various factors.
Portugal: 50% of capital gains arising from the sale of real estate by tax residents and non-tax residents in Portugal are taxed at marginal rates varying between 14.50% and 48% (plus the solidarity rate, if applicable).
Singapore: In Singapore, the CGT is not applicable to the sale of residential property.
Spain: In Spain, the CGT rate is 26% for residents and 19% for non-residents.
Thailand: Capital gains on the sale of investments derived from or in Thailand by a foreign company not carrying on business in Thailand are subject to a tax of 15%, withheld at source by the purchaser, unless otherwise exempt under a DTT.
United Kingdom: The rate of CGT is 10%, where the total taxable gains and income is less than £37,700. Any excess gains are taxed at 20%. Where business asset disposal relief applies, the rate of tax on the whole gain is 10%, subject to a £1m lifetime allowance.
United States*: In the U.S., the CGT rate is 0%, 15%, or 20%, depending on their tax-filing status. Individual taxpayers will not pay any CGT if their taxable income is $44,625 or below. If their income falls between $44,626 to $492,300, the CGT rate is 15%. Above $492,300, the rate increases to 20%. A flat tax of 30% is imposed on U.S. source capital gains in the hands of non-resident alien individuals physically present in the United States for 183 days or more during the taxable year.
*How to Defer Capital Gains!
“1031 Exchange” is a type of tax deferral strategy used in the United States for real estate transactions. It allows investors to defer paying capital gains taxes on the sale of a property by "exchanging" it for a similar "like-kind" property. The idea behind this strategy is that investment in real estate can continue to grow tax-free until the final sale, when taxes are ultimately paid.
In Summary
Real estate can be a valuable investment, providing a place to live and the potential for capital gains. Currently, some of the top markets for real estate capital gains include the United States, Canada, Australia, and the United Kingdom. The global real estate market in each of these countries offers its own unique opportunities and challenges, and a range of factors, including economic growth, interest rates, demographic trends, and government policies, influences it.
At Global Mortgage Group, we understand the complexities that international investors face when it comes to capital gains tax. We provide tailored advice to meet our client's specific needs. Our team of experts is dedicated to providing personalised solutions to help our clients maximize the return on their investments while minimizing their tax liabilities.
Contact us today to learn more about how we can help you get the most out of your capital gains tax and learn all about GMG's financing solutions for foreign national investors at [email protected].
STAMP DUTY COMPARISONS FOR INTERNATIONAL REAL ESTATE INVESTMENT DESTINATIONS
For international real estate investors who intend to use the property to earn income, the numbers have to make sense. The definition of Stamp Duty is a tax that the government places on legal documents, usually involving the transfer of real estate or other assets, and having them legally record those transactions.
In reality, it's a tool governments use to control housing prices. When housing prices rise too aggressively, governments increase stamp duties to cool prices and vice versa if governments want to promote property purchases. In some countries like Singapore, stamp duty can be as high as 30% for first-time buyers - yes, 30% just to prepare some documents!
How It Works
When it comes to property transactions, stamp duty charges are typically based on the purchase price of the property and vary depending on the property's location, with some states and territories having higher rates than others. In addition, different rates may apply for different types of properties, such as residential or commercial properties. On top of property transactions, stamp duty charges can also apply to the transfer of shares and certain other types of transactions. The rate and applicable transactions can vary depending on the jurisdiction.
Overall, stamp duty charges are an important consideration for anyone, especially foreign national investors looking to buy property.
Global Comparison
Here's a list of stamp duties for the countries we offer mortgages to:
Australia:
Stamp duty varies for each state in Australia but as a rule of thumb, it's 3-4% of the property value.
Canada:
Canada has no stamp duty. Instead, the country imposes a tax on the occupation of properties.
As of January 1, 2023, Foreign nationals are banned from purchasing property in Canada. The law provides exceptions for home purchases by immigrants and permanent residents of Canada who are not citizens.
Dubai:
If the target company or a subsidiary holds real estate in the UAE, then registration fees would be payable. The rates vary depending on the emirate.
In Dubai, a registration fee of 4% is payable on the value of the property where there is a transfer of either freehold title or a long-term lease of 10 or more years, with 2% being typically borne by the buyer and 2% by the seller.
France:
The French government imposes a property transfer tax on the sale of real estate.
The rate of tax varies depending on the location of the property and the type of transaction and can range from 2% to 12%.
Hong Kong:
Ranging from HK$100 for properties under HK$2 million up to 4.25% of the sale price for property over HK$21,739,120.
The stamp duty rate jumps to 15% for non-permanent residents and Hong Kong permanent residents buying a second property.
Italy:
This tax is between 2% and 9% of the cadastral value of the house.
However, it will never be less than 1000€ regardless of the value of the property.
If you are buying from a private person, you do not pay any VAT. In addition, if this property is your primary residence in Italy and you spend more than 6 months per year in Italy, the tax will only be 2% of the property's value.
On the other hand, if this is your second property and you are not a permanent resident, this tax rises up to 9% of the cadastral value.
Japan:
3% of the sales price + 60,000 yen + consumption tax in accordance with property transaction regulations.
For registering ownership transfer or mortgage on a property.
Fee for conducting ownership transfer and necessary related registration.
Portugal:
The duty is paid by the buyer and charged at a fixed rate of 0.8% of the property's registered fiscal value.
Stamp Duty is charged for all documents and arrangements in respect of real estate, including deeds, contracts, and mortgages.
Singapore:
Singapore Citizens: The second (17%) subsequent (25%) property purchases.
Singapore Permanent Residents (SPRs): On all purchases, rates start from 5% for the first purchase. The second purchase will be 25% third, and subsequent purchases will be at a rate of 30%.
Good news! Under the respective FTAs, Nationals or Permanent Residents of the following countries will be accorded the same Stamp Duty treatment as Singapore Citizens: Nationals and Permanent Residents of Iceland, Liechtenstein, Norway, or Switzerland and Nationals of the United States of America.
Foreigners: 30% rate for any property purchase.
Entities (companies or associations): 35% for each property (plus an additional 5% non-remittable ABSD for developers)
Spain:
Stamp duty at 1.5% of the purchase price.
Thailand:
There is a stamp duty if signing or bringing original share transfer documents into Thailand, which is 0.1% of the paid-up value or of the purchase price, whichever is higher.
The parties can agree that the buyer is solely responsible for stamp duty payment or that the stamp duty be shared between both parties.
Unless agreed otherwise, the seller is responsible for stamp duty payment.
United Kingdom:
First-time buyers pay no SDLT on purchases up to £425,000
First-time buyers pay 5% SDLT on the portion from £425,001 to £625,000
Second-home purchases attract a 3% premium for valuations over £40,000
United States:
There is no stamp duty in the United States.
In Summary
Stamp duty rates vary greatly across the globe, and it's important for investors to be aware of the costs associated with purchasing property in different countries. While some countries have relatively low stamp duty rates, others have very high rates that can significantly increase the cost of purchasing property. As you can see, the United States has no stamp duty compared to other countries like Dubai, U.K., or Australia. It's important for investors to factor in stamp duty costs when comparing investment opportunities in different countries.
GMG has a team of qualified professionals who can help navigate the process and provide guidance on the costs associated with purchasing property in a specific country. By considering stamp duty and other costs, foreign national investors can make more informed decisions and potentially save thousands of dollars on their real estate investments.
Get in touch with us to learn more about global real estate investing and all about GMG's financing solutions for foreign national investors today. [email protected]
In our first article of the year, we want to reference the recently-published “Knight Frank’s APAC Real Estate Outlook 2023”.
This report is particularly relevant given that their target audience and readers of UHNWI, HNW, and Global Family Offices are the same as ours. We work with private banks, client advisors, external asset managers, real estate agencies, and family offices all around the globe as their real estate financing and property-sourcing partner.
KNIGHT FRANK APAC REAL ESTATE OUTLOOK 2023 SAYS --> U.S.A. #1!
One glaring takeaway from the Knight Frank report is that out of the Top 10 Locations for a 2nd Residence for Asian and/or UHNW buyers, U.S.A. is their top choice!
Here is the list in order of preference:
1 – U.S.A.!!!!
2 – Australia
3 – New Zealand
4 – United Kingdom
5 – Singapore
6 – South Korea
7 – Taiwan
8 – Japan
9 – Indonesia
10 – France
PEOPLE ARE FINALLY NOTICING WHAT WE HAVE BEEN SAYING -> U.S.A.!
While we have been way ahead of this thesis, having been on our journey the past 5 years promoting the benefits of owning U.S. real estate, what we find interesting is that: 1) global real estate behemoths like Knight Frank are promoting U.S. Real Estate and 2) the Asian and UHNW clientele have chosen U.S.A. as their favourite destination for owning a second home.
WHY INTERNATIONAL INVESTORS ARE FAVOURING THE U.S.A. vs. R.O.W.?
Over the past 12-24 months, what has been clear to us from conversations with our clients, in the eyes of an international investor is that:
1) real estate is finally an inflation hedge, 2) the U.S. is a safe haven, especially for real estate, 3) having more USD exposure has economic benefits, 4). while they may not want to live there permanently; having a base in the U.S. has benefits (U.S. Family Office, U.S. Trust, etc.), 5) the age of children who were born during the start of the latest economic boom (say around the time China entered the W.T.O. in 2001) are now entering high school/university. The U.S. still has the best for both globally, 6) the U.S. tax regime is not as complicated as perceived, 7) they would appreciate help finding the property, advising on tax and corporate holding structure, and arranging a property management company.
KNIGHT FRANK’S REPORT ECHOES WHAT OUR CLIENTS ARE SAYING TOO!
In their report, the top 3 themes influencing investment strategy are 1) mitigating higher inflation (69%), 2) income security (67%), and 3) focusing on safe haven markets (55%).
While this is consistent with what our clients tell us, Education is also an important theme. This is assumed given Education is what drives price appreciation, which in turn creates a safe haven market.
GMG HIGH-NET-WORTH REAL ESTATE ADVISORY
We launched this in 2022, and we have grown our capabilities due to demand from our end-clients and global partners, private banks, family offices, external asset managers, and client advisors.
Residential Real Estate Financing: U.S.A., Mexico, Canada, U.K., France, Spain, Portugal, Dubai, Singapore, Hong Kong, Thailand, Philippines, Japan, Australia
Global Bridging Loans: U.S.A., Canada, U.K., Australia, Singapore, Hong Kong, Thailand, and Philippines.
Asia Institutional Structured Real Estate Debt Financing: US$50M minimum (<$50M case-by-case basis), Construction, Development, Singapore, Hong Kong, China, and Australia.
Global Property Sourcing*: U.S.A., Canada, U.K., Spain, Dubai, Singapore, Hong Kong, Thailand, Philippines, Australia, and Japan.
Global Property Extended Services*: Expat and/or Foreign National Tax and Holding company advice, Property, and Personal insurance.
Other Financing Solutions: Share financing, Crypto financing (case-by-case), and Luxury watch financing.
*Introductions to carefully-selected partners to include by not limited to developers, real estate agents, lawyers, and accountants.
THE GMG STORY
Founded in 2019 by Donald Klip and Robert Chadwick to provide solutions to international clients looking to secure real estate financing in countries where they are not residents, typically for investment purposes or a second home. We have now grown to a team of 25, spread across the world, offering financing solutions to every major country in the world with over 300 lending relationships globally.
More than $1 billion worth of single-family rentals will be acquired by JPMorgan Chase & Co.'s asset management division, while Blackstone is looking to invest $120 billion in real estate. Notably, most of Blackstone's investment is in REITs. This is a sign that the current U.S. housing market hasn't scared investors away from suburban housing.
Here's why you should care
This move by JP Morgan and Blackstone is the most recent sign that big investors are resolute by the unstable real estate market.
That's why all investors, though particularly those looking to invest in U.S. real estate, should be very interested in JP Morgan & Blackstone's real estate investment spree. Institutional investors have many advantages over retail investors. They have the backing of sometimes billions of dollars that allow them to accumulate properties at a high rate and profit from the rental income. They can also set the tone for the specific market by acquiring inventory where they believe rental yields will be the highest.
If you are curious about institutional buyers and how buying single-family homes affect average investors, this article discusses why institutional investors buy single-family homes and what it means for you this year.
Coronavirus and real estate investing
The Coronavirus pandemic changed how we live, work, and act in many different ways. For instance, most corporate jobs now come with remote-optional benefits that allow employees to work from anywhere – including their own homes. This means that the demand for housing is increasing and contributing to a major change in home ownership.
Institutional investors continue buying real estate in major metropolitan areas such as Los Angeles, Dallas-Fort Worth, and New York City. In particular, institutional buyers target single-family homes, which now make up over 13% of the residential real estate market.
U.S. housing market shortage
How bad is the U.S. housing shortage? According to Nadia Evangelou, the Senior Economist of the National Association of Realtors, "There doesn't appear to be an end in sight." Despite rising interest rates, the current shortage will likely worsen to more than a 5.5 million home shortage. With developers pulling back due to market uncertainty, rental yields are expected to see all-time highs in many markets. Large investors such as JP Morgan and Blackstone see these as opportunities; perhaps so should you.
What does it mean to you as an individual investor?
Institutional investors bought almost 25 percent of all single-family homes sold last year. So how can you compete with institutional investors in today's market? Below are our top tips for competing with big investors today:
Get pre-approved
As a U.S. expat or foreign national, in order to compete with other buyers, one of the best ways is to get pre-approved for the mortgage before you start your home search. This shows the seller that you've had the foresight to get a mortgage in place prior to looking for a property. With America Mortgages, you can get pre-approved within 48 hours, there is no application fee or charge for pre-approval, and we approve over 97% of all applications.
Write a note to the seller
Although this may seem "quirky," in some markets, intense competition forced buyers to do anything they could to stand out among sometimes dozens of other offers on the same home in 2021. Writing a handwritten note to the seller is one way that buyers try to compete with institutional investors by persuading the sellers to choose them over others.
Work with a realtor that focuses on investment properties
Just as it's important to work with a mortgage company that understands clients living outside the U.S. buying investment property in the U.S., a realtor that understands this is crucial. These realtors know the properties with the best yield potential in neighbourhoods with the best tenant profile. America Mortgages' Concierge Service is a free service created to put our clients in touch with vetted realtors in specific markets to assist with finding a property that matches their requirements.
Location. Location. Location.
It may be cliché, but location is key when buying properties. Following similar locations that large institutional investors are looking at, gives you similar insight without the team of researchers and analysts they employ. Homes in cities that have little room for expansion tend to be more valuable than in cities that have a lot of room. Factors such as accessibility and proximity to parks, schools, railways, and public transportation can increase property values and rental yields.
Tricks of the trade
Knowing what works with an offer to purchase real estate is important. There are often clauses or requests that can be added to a contract to lessen the cost out of pocket for the buyer. As an example, seller concession is a common clause used by many U.S. real estate buyers but is not well-known to global real estate investors. If a seller concession is approved, the buyer can significantly reduce the cost out of pocket as the seller of the property will pay for a lot of the buyer's closing costs. These funds can be used to "buy down" the interest rate, make required improvements to the property, or as simple as paying for the appraisal report.
Date the rate. Marry the property.
The idea is relatively straightforward. You buy a home you really want, regardless of available financing terms.
The mortgage rate you receive, even if it's high today, isn't your forever rate because you can always refinance down the road.
There will always be a time to refinance in the future once mortgage rates go down again. The property, on the other hand, may not be available. It's a buyer's market now. Take advantage of it.
Why work with our subsidiary, America Mortgages?
As a company, America Mortgages' only focus is providing U.S. mortgage financing for U.S. expats and foreign nationals. 100% of our clients are living and working abroad but buying U.S. real estate. We know exactly what is required to ensure your mortgage journey is stress-free by qualifying 97% of our clients for a U.S. mortgage.
Schedule a call with our U.S. mortgage specialist to determine your options today.
Over the past few months, we surveyed over 1,000 of our clients and partners globally with the following question:
"What is the key consideration for owning an investment property in the U.S.?"
The top 3 answers were:
1. Education 2. Price and Affordability 3. Profit/Income Potential
In this report, we look at the top public and private schools in California, New York, Texas, and Florida, and we rank them by:
1. Highest SAT scores 2. Cities with the highest rental yield 3. Cities with the Lowest Home Price-to-income ratio
We then conclude our report with our team's top 3 personal choices for US public schools, based on a combination of high SAT scores, the liveability of the city, rental income potential, as well as other personal and subjective aspects.
WHY IS EDUCATION IMPORTANT?
Job market growth is certainly a key driver for price appreciation and is normally driven by new business formation in the area. Still, popularity as a living destination is driven by things like safety, cost of living, ease of transportation, and of course, quality of education.
"Popularity as a living destination" drives demand, home value appreciation, and strong growth in rental income.
Education is an important factor for overseas property investors in determining where their next home purchase will be in the U.S. Most of the time, the objective of owning real estate to earn income almost always comes down to "could I live there one day"?
In Asia, for example, where owning property is ingrained in their culture, it's common to purchase an investment property "in anticipation" of sending their child to college.
They could even live there during or after graduation, and the price appreciation could even pay for college if they sell the property.
Or if the child decides to get a job in the U.S., they can stay in the apartment as a post-graduation gift to build up their credit or even rent it out to earn income.
Many new immigrants or returning expats will choose to live in areas where there are good schools and a higher population of similar background families. High schools are a very important decision since it will determine their experience during the formative years between 14-18 years of age and potential college choices.
TOP 5 SAT SCORES
These rank the schools with the highest standardised test scores.
California Public Schools
California Private Schools
New York Public Schools
New York Private Schools
Texas Public Schools
Texas Private Schools
Florida Public Schools
Florida Private Schools
TOP 5 HIGHEST RENTAL YIELD
Here we take the Average Yearly Rental Income as a percentage of the Average Home Price in the city or neighbourhood the school is in. This shows us how much income the asset produces vs. its cost. This is a rough guide, but I can argue it is understated since home prices are declining while rents have been increasing across the country.
California Public School Cities
California Private School Cities
New York Public School Cities
New York Private School Cities
Texas Public School Cities
Texas Private School Cities
Florida Public School Cities
Florida Private School Cities
TOP 5 LOWEST HOME PX-TO-INCOME RATIO
This is similar to a P.E. ratio for stocks. It's based on the Average Home Price compared to the Median Household Income in that particular city. The lower the price, the more affordable it is (IE better value), or in another way, the less the homes have increased vs. the income of that particular area. Nationally, the average is 4.7, but in popular destinations such as California or Hawaii, the ratios are 8.9 and 9.4, respectively.
California Public School Cities
California Private School Cities
New York Public School Cities
New York Private School Cities
Texas Public School Cities
Texas Private School Cities
Florida Public School Cities
Florida Private School Cities
Conclusion
Looking at absolute test scores, New York and California have cities with the highest SAT scores for both public and private schools. However, these states will also have a higher home price-to-income ratio since they are fairly well-known destinations for overseas buyers - Palo Alto, Manhattan, San Francisco, etc.
In this report, we want to highlight the value option. Cities where you are able to purchase a home that is not only affordable on an absolute basis but relative to its Median Household Income of that city.
In this case, Texas and Florida are better options. In Florida, good areas to invest in include big metropolitan cities like Jacksonville and Bradenton, which boast surprisingly high rental yields ranging from 11% to 19%, respectively!
In Texas, rental yields are lower than Florida but still much significantly higher than California and New York and most importantly, higher than cost of financing. Largely populated cities like Houston and Dallas have the highest rental yields of 7.8 % and 9.5%. If you are only considering areas with good school districts, I recommend choosing areas that are closer to private institutions. You will be guaranteed a similar standard of education as New York and California public schools while earning a comparable income from investment.
OUR TOP CHOICES FOR PUBLIC SCHOOLS IN THE U.S.
This of course are personal choices. The truth is all of these schools are amazing and cities which they are located in all very liveable. If you want to be introduced to our realtor partner in these specific cities to learn more as well as property options available, please email us at: [email protected]
1. Canyon Crest Academy, San Diego, California
Canyon Crest Academy is a prestigious public high school in San Diego, California. This is my number one choice as it ticks all the boxes. The area is diverse, affordable, and has high educational standards, as the school is ranked second state-wide (1400 SAT, 31 ACT). As a California native who's seen it all, I would also name San Diego as the most beautiful area in the state. In San Diego, you can enjoy stunning beaches, perfect weather, and amazing food, all whilst attending a top school. Additionally, if you are someone who considers college as part of your moving decision - for yourselves or for your kids - California is also a great place to live because of its proximity to top universities. Schools like UCLA, UCSD, UC Berkeley, and Stanford are only a drive away, which makes it easier and more accessible for families and their children.
2. School for Advanced Studies Homestead, Miami, Florida.
School for Advanced Studies Homestead, in Coral Gables, Miami, is a top 10 public high school in Florida. Located southwest of downtown Miami, Coral Gables is well known for its exclusive private estates, shopping districts, and upscale suburban lifestyle. After visiting the area last summer, I was stunned by its beauty and liveliness. Coral Gables is young, fun, and perfect for raising a family. I was surprised to find that the neighbourhood was less expensive than I thought. The average price of a home in Coral Gables is $235,800, with an average rent of $1,303. In this area, the rental yield is also higher at 6.6%, which increases your potential rental income.
Investing in an area like this would also be beneficial long term as it is only a short drive away from the University of Miami, one of the top 3 colleges in Florida. If your child is considering attending a college within state borders, Coral Gables is a great option.
3. Bronx High School of Science, Bronx, New York
If you're looking for an affordable house in New York City, be sure to take a look at the Bronx. Not only is the borough home to massive parks, diverse neighbourhoods, and great eats, but it also has the lowest average home price of any borough, hovering at $266K as of October 2022.
What's more, the Bronx has the highest-rated schools in the city. Bronx High School of Science is ranked number one amongst public high schools in New York (1400 SAT, 33 ACT). Investing in a home in the Bronx will also secure you a stable cash flow compared to other districts, as the rental yield in the area is 5%, 2% higher than the state average. On a more fun note, the Bronx is also the essence of the culture in New York. It is the home of hip-hop, jazz, and Yankee Stadium. You will surely get to enjoy the New York vibe when living in the Bronx.
If you find yourself enjoying pristine beaches, sangria, and architectural masterpieces, Spain might just be the destination for you. The beautiful coastal region is surrounded by three sides of the Mediterranean Sea, offering stunning views of scenic coastlines. Such attractions have allured an intense interest in foreign buyers, driving up property values by 11.8% in cities like Barcelona, Madrid, and Valencia. As a result, this has made Spain a prime spot for both vacation homes and property investment.
Here are some of the top reasons why you should invest in Spanish rental property and experience all this beautiful country has to offer.
Rental Income Potential
According to data released by the Central Bank of Spain in March of 2022, the expected return on the property investment market in Spain is around 10%. Spain, and especially the Spanish Costas, are proving increasingly attractive to purchase a house for rent. The average return on investment in Spain is high at 6.7 percent and peaks at almost 8 percent along Spanish coastal areas– Costa del Sol, Costa Blanca, and Costa Brava.
Price Appreciation Outlook
The end of the Covid-19 pandemic has turbocharged price appreciation in Spain. High demand and low supply, together with a decrease in construction and an increase in the price of materials, are big contributors to Spanish rental appreciation following post-pandemic recovery. As of October 2022, prices of existing dwellings in Spain have reached record-high numbers for cross-border investment. The Spanish property market is trending upward, and experts estimate around 750,000 property transactions will occur this coming year, with an average price growth prediction of 10%.
Low Cost of Living
Due to low minimum wages and average salaries in Spain, the cost of living is relatively affordable compared to other European countries. A family of four should be able to live comfortably in Spain with average monthly expenses of €3,120, including rent, utilities, transportation, and basic needs. Housing in Spain varies depending on the city, but typically, if you are buying Spanish property, the average property price per square meter in Barcelona and Madrid hovers around €3000–€5,000 (€150,000–€250,000 for a 50 square meter apartment). Homes with greater square footage in more exclusive areas of both cities can cost up to €600,000–€700,000. Expats living in the coastal region of Spain can expect to pay slightly more than other cities, although there are some exceptions. More affordable areas in Spain include Extremadura, Aragon, Castile-La Mancha, and Navarre, and the more expensive places to live in are prime vacation destinations such as The Balearic Islands – Ibiza, Menorca, and Mallorca.
As of now, buying rental property in Spain is one of the best assets to invest in due to its high rental yield, forecasted appreciation, and quality of life. If you are interested in investing in European real estate, Spain is a great location to consider.
Mortgage Options for International Investors
Foreign investors and non-Spanish residents can now get appealing terms to finance their property purchase in Spain, such as a minimum loan amount of €250,000, up to 25 years (or until the borrower turns 75), and interest rates starting at 3.5%! The best part? This is available for properties throughout Spain, The Balearic, and The Canary Islands! With up to 75% loan-to-value, this program was created by GMG, particularly for foreign nationals! You'll be amazed at how simple qualifying is and the speed of the entire loan process.
Get in touch with us to learn more about investing in Spain, properties available to purchase through our partners and about GMG's financing solutions for foreign national investors today. [email protected].
Due to the sheer amount of investment opportunities, Dubai has become an attractive target for international investors. Expats looking to live and work in leading global business hubs that offer a luxurious quality of life and a good working environment have Dubai as a top option.
Here is what you need to know about investing in one of the fastest-developing countries in the world.
Amount of International Investors
With desirable tax-free policies and little to no limitations on profit expenses, Dubai has one of the most notable track records for acquiring overseas investors. According to Invest Dubai, the emirate’s efforts to streamline regulation, support innovation, and develop human capital have paved the way for its premier presence today as the preferred global FDI destination for both Fortune 500 companies and new entrepreneurs alike.
Consequently, Dubai has generated its highest amount of rental activity in decades, outpacing many western cities as the biggest investment destination with an average annual rental yield going upwards of five percent. Real estate blog Kaizen reports Dubai’s real estate sector to have attracted 19,757 foreign investors, of which concluded 24,666 investments worth over Dh35.6 billion.
Cost of Living
Due to its portrayal in the media, many assume you have to make a six-figure salary to even consider living in Dubai. However, the cost of living is not as high as one might think. In fact, one of the reasons Dubai is such a popular destination for foreign investors due to its lack of income tax and minimal sales taxes. Rental costs and living expenses are also quite low compared to other urban cities like London or New York. According to DMCC, the average rent for a studio apartment in the centre of Dubai is AED 5,141.89 (USD 1399,92), with monthly expenses of AED 3,477.89 (USD 946,88). Similarly, the average home price in the centre of Dubai is AED 2,791,502 (USD 760,000).
Visa Opportunities (Portugal, Spain, Dubai)
Recently, the UAE has relaxed restrictions on their coveted Golden Visa to attract more expatriates. Along with slimming down their minimum investment requirements from AED 5 million to AED 2 million, the UAE also doubled its validity from 5 years to 10 years. Under the new amendments, investors are now entitled to obtain long-term residence when purchasing property loans from local banks.
Top Areas in Dubai
According to 99acres, the most sought-after real estate properties in Dubai are within Dubai Hills Estate and Dubai Silicon Oasis, both of which are luxurious residential areas. Palm Jumeirah, Dubai Marina, and Dubai Downtown are also popular locations because of their exclusivity and glamor.
The listings in these areas suggest that residential apartments dominate almost 75% of the housing demand in Dubai. Among them, one-bedroom and two-bedroom units have the highest demand, with prices starting from around AED 66,700.
Another popular configuration in Dubai is independent houses that generally comprise two bedrooms and above. The prices of these standalone units begin at AED 111,160.
GMG Dubai Mortgage
With up to 25 years, maximum 75% loan-to-value, and interest rates starting from 5%, foreign investors and non-Dubai residents can now obtain attractive terms to finance their Dubai property purchase.
GMG designed this program specifically for foreign nationals with particular focus on the ease of qualifying. The speed of the entire loan process will surprise you.
The "Bizarro World" references Bizarro Superman, a supervillain who lives in a world where everything is opposite. Here's a great explanation from the TV show Seinfeld.
This reminds me of the world we live in now; mortgage rates double in 10 months, and yet, rental yields continue to increase double digits, year-on-year.
I have been telling our clients over the past few months that it is a great time to be owning a home in the U.S. for investment income. Most of us have lived through a few economic cycles, and for most of my career, 30-year fixed rates were between 6-7%, which is when I got my first mortgage in 2006, similar to where rates are now.
However, back then, you owned homes almost as leveraged equity, not like what it's meant to be, more similar to a bond.
When academics say real estate is an inflation hedge, that is a peculiar concept since we have not really seen any inflation since the 70s, so not many of us know what that means in real life.
Till now….
This world is very different. Good or Bad, the fact is that there are significantly more people who need housing, millennials are unable to afford homes, and the rising rates have squeezed out the marginal buyer, and all of the above need to live somewhere.
My colleagues hear me say this ad nauseam,
"We will be in a world where 30-year fixed-rate mortgages are 7%, but rental yields are 10-15% very soon".
I will try to explain why in this report.
A few days ago, on October 13th, Redfin reported that the Median U.S. Asking Rent rose 9% year-over-year in September to $2,002, the slowest growth since August 2021 and the first single-digit increase in a year. Sure the article makes it sound bearish.
Wait a minute? (sound of car screeching on the pavement).
Mortgage rates have doubled since the beginning of the year, and yet rents are still rising 9% a year. (As recent as May, rents rose +18% year on year!)
While visually, it does look like rents are falling, but that was from an outlier peak of 18% in May….my personal view is anything that has growth in this world is POSITIVE!
In some cities like Oklahoma City and Pittsburgh, rents rose by more than 20% year-on-year (not a typo). More below.
THE PROBLEM – HOUSING SHORTAGE
A housing shortage is not something you can really see. We hear it on the news or read it in the papers, and we think…how can that possibly be an issue.
Can't homebuilders just build more homes?
The NABM/Wells Fargo Housing Market Index dropped three points to 46 in September, the lowest reading since May 2014!
Meanwhile, "Application to Build" declined to 1.52M units, the lowest since 2020.
Number of Building Permits (SAAR)
One could also conclude with higher borrowing costs, homebuilders are discouraged from starting new projects, which is not helping the undersupply situation.
Another aspect of this is the financial incentive.
Like many other issues in the U.S. economy, there has been a focus on shareholder returns, dividends, share buybacks, etc., and hence the underinvestment in housing development since the Financial Crisis in 2008.
In fact, fewer homes were built in the U.S. in the 10 years following the 2008 financial crisis than in any decade since the 1960s! Think about that for a moment!
In the normal world, high mortgage rates tend to bring down values, and of course, there are some parts of the U.S. that are seeing a relatively faster decline in home prices, like San Francisco. I would argue that is city-specific, as the local economy hollows out and the homeless situation and cost of living is untenable for most.
Across the nation, there are indeed fewer sales and more price cuts on listed homes.
However, in this "Everything-is-weird" economy, the doubling in mortgage rates hasn't caused home prices to fall as much as you would think, all things equal.
In fact, I really don't think we are going to see any substantial collapse in home prices in the coming years because many owners bought when mortgage rates were low and can simply stay put through this phase of the economic cycle.
Also, there was less speculation, and investors put more equity in the properties during a time of tight supply. This will keep many families locked out of homeownership and forced to rent.
Here are some mind-blowing data points: Around half of all mortgages outstanding are under 4% fixed for 30 years, and about 40% of all homes are owned free and clear. Think about that for a moment!
Last month, Philly Fed President Patrick Harker discussed his recent research report with most major news outlets, "Unpacking Shelter Inflation", September 2022, that the housing shortage is a key inflation driver. Read: "…housing shortage…"
In another research report by the Fed, "Volatility in Home Sales and Prices: Supply or Demand?", Anenberg and Ringo, June 2022, write:
"We find that a 30% increase in the monthly number of homes coming onto the market would have been necessary to keep up with the pandemic-era surge in demand. Since new construction typically accounts for about 15% of supply, our estimates imply that new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand. This is a very large, unrealistic impulse to housing supply in the short-run, suggesting that policies aimed at reducing bottlenecks to new construction would have done little to cool the housing market during Covid-19."
Read again: "…new construction would have had to increase by roughly 300% to absorb the pandemic-era surge in demand."
Here is yet another report, this time by Freddie Mac. "Housing Supply: A Growing Deficit", Kater, May 2022. I give a little more weight to Freddie Mac since they are actually buying the loans. Their thesis is that:
"As of the fourth quarter of 2020, the U.S. had a housing supply deficit of 3.8 million units. These 3.8 million units are needed not only to meet the demand from the growing number of households but also to maintain a target vacancy rate of 13%. Between 2018 and 2020, the housing stock deficit increased by approximately 52%."
Read yet again! "…U.S. housing supply deficit of 3.8 million units."
I always take stuff like this with a grain of salt because academics look at things from a 10,000 ft altitude and through the lens of an Excel spreadsheet, but the gist is that every Think Tank in the world seems to claim there is a shortage of housing supply and since they have a few more tools (and PhDs) at their disposal for this that I do, I will take their conclusions at face value.
Here is a neat graphic from The New York Times, The Housing Shortage Isn't' Just a Coastal Thing Anymore" Badger and Washington, July 2022.
The Housing Shortage has Spread to More Parts of the Country.
Source: Up for Growth analysis of U.S. Census Bureau and U.S. Department of Housing and Urban Development data. Shortage percentages reflect estimated housing units needed to meet demand as a share of existing housing units. Metros with a surplus have enough housing for existing residents.
Let’s look at recent city-specific rental prices:
Top 10 HIGHEST Year-on-year Change in Median Asking Rent (%) *
Top 10 LOWEST Year-on-year Change in Median Asking Rent (%) *
Top 10 HIGHEST Median Asking Rent *
Top 10 LOWEST Median Asking Rent *
* From Redfin News: "Rental Market Tracker: Rents are Growing Half as Fast as They Were 6 Months Ago," by Lily Katz, October 13, 2022 Methodology - Redfin analyzed rent prices from Rent.com across the 50 largest U.S. metro areas. This analysis uses data from more than 20,000 apartment buildings across the country.It is important to note that the prices in this report reflect the current costs of new leases during each time period. In other words, the amount shown as the median rent is not the median of what all renters are paying but the median cost of apartments that were available for new renters during the report month. Currently, Redfin's data from Rent.com includes only median rent at the metro level. Future reports will compare median rent prices at a more granular geographic level.
DEMAND IS DIFFERENT NOW
Single-person households accounted for 80% of the new household units that have formed since 2020. Think your one-man Crypto trader or Tik Tok marketer. Meanwhile, the number of Gen Z adults living alone almost doubled from January 2020 to early 2022 (sounds like a lot of COVID breakups), likely using the stimulus income to get started. The point here is that the way labour formation is defined now makes this current real estate cycle and how it interacts with the overall economy very different from past cycles.
Another quirk of the world we live in is Video Conferencing. While we can imagine a world where we go back 5 days a week but in reality, my view is that how we work has changed forever and there are clear benefits for being able to Zoom. What this has done is artificially increased the living space needed (globally). That is to say, adding a corner or a room just for Zoom calls etc, driving up demand for overall living space.
SUMMARY
In summary, the makeup of the labour market, as well as the supply demand imbalances in real estate, are very supportive of higher rental prices and rental yields over the long term.
As a non-resident buyer of U.S. real estate hoping to earn income, this is the perfect storm and has only happened BECAUSE rates are rising.
We may see rates come down in the future where borrowers can easily refinance into a lower rate, but what if prices do not come down or there is a sudden price surge next year? These are all crystal ball-type guesses but what I want to leave with you in this report is that the lack of supply is a major long-term driver of higher rental yields, which is positive for any U.S. real estate investor.
U.S. real estate is considered a safe haven for many – low entry price point, no stamp duties, ease of gentrification, available tax deductions, USD income, ease of travel, quality of schooling, and the list goes on.
If you have any questions about this report or about anything U.S. real estate or mortgage related, please feel free to reach out to me directly at: +65 9773 0273 or email me at [email protected].
Global Mortgage Group Pte. Ltd. is the world's leading international mortgage specialist. Based in Singapore with offices and partnerships across the globe, we connect our international clients to our network of lenders around the world. GMG offers financing solutions in the United States, United Kingdom, France, Canada, Australia and Singapore.
