Last year, $2 billion worth of overseas properties were transacted by real estate agencies in Singapore, an increase from $1.4 billion in 2012, the Monetary Authority of Singapore (MAS) revealed in a response to media queries.
Investors are reminded to be aware of the risks associated with purchasing overseas property.
For instance, they will have to be familiar with the overseas markets’ conditions, such as the prospects for oversupply of properties or an economic slowdown, as the risks associated with the property price cycle are more difficult to assess.
The legal and regulatory framework for property purchases and financing agreements in other countries, including the protection that buyers get, can be very different from Singapore. MAS’ spokesperson said, “For example, while property developers in Singapore are required to maintain project accounts and adhere to strict progress payment rules, there may not be similar safeguards in other countries.”
Buyers should also consider the foreign exchange rates if rental yields are in a foreign currency while the loan for the property is in Singapore dollars. Furthermore, the interest rates may be higher or move differently from local interest rates.
Bank loans in Singapore to finance overseas property purchases are covered by MAS’ total debt servicing ratio (TDSR) regulations . “The TDSR rules, however, cannot prevent those who take loans from lenders outside Singapore or use their own savings to finance overseas property purchases from over-extending themselves,” a MAS spokesperson said.
Muneerah Bee, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
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