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WORTH: Building Your Global Real Estate Portfolio
Asian governments are courting vacation-home buyers who are looking for both exotic locales and investment opportunities.
By BY STEVEOLLMAN
EASTERN PROMISE
THOSE SEEKING A VACATION HOME in an exotic locale are finding themselves wooed for the first time by some formerly standoffish Asian governments. Traditionally, these countries-including Singapore, Thailand, Malaysia and Indonesia–have discouraged foreigners from laying claim to attractive properties, but this is changing.
"I think in all Asian environments there is a natural caution and resistance in terms of [not wanting] to open the floodgates to having foreigners owning the majority of the valuable property," notes David Simister, chairman of CB Richard Ellis (Thailand) in Bangkok.
But as wealthy individuals continue to seek vacation homes in interesting regions, especially those that also hold the prospect of performing well as investments, a number of Asian governments are offering (or at least considering) incentives.
Under the "Malaysia My Second Home" program, buyers can get a 10-year multiple– entry visa that is easily renewed; the government recently increased it from five years. In Singapore, second–home buyers still cannot own land-only units within buildings, generally-but the government is making exceptions for a new luxury waterfront area, Sentosa Cove, to ensure its success. Indonesia is considering legislation to allow foreigners to own land.
For the investment-minded, there is plenty to like in Asia.
"If you compare it to buying a ski villa in Whistler, you’re in more unfamiliar territory," Simister says, "But you are buying an exotic property in a part of the world where the capital appreciation-well, there’s still plenty of evidence that there’s a lot more to come."
Simister tells of Americans who bought properties in Phuket, Thailand, a few years ago and have since seen 100 percent–plus gains on their investments. Regarded as Asia’s top yachting spot, Phuket is dotted with luxury marina residential complexes. Many properties have berths for boats, and the government recently slashed the VAT on yachts, partly to encourage foreigners to invest here.
"The good prime sea-view properties can only continue to appreciate," Simister notes, "We’re seeing several properties that we’re now denoting in millions of U.S. dollars. A couple of years ago people felt the million-dollar mark couldn’t be breached."
THE OCCIDENTAL TOURIST
While opportunities abound, some areas are seen as too dangerous. "High-net-worth individuals [are] staying away from the Philippines," says Carmela Ma, president of real estate brokerage CJM Associates in Beverly Hills, "There’s just been too much kidnapping."
Another worry is the fact that the region’s governments occasionally change their rules about foreign ownership, Ma. says. She commends Thailand for being relatively stable in this regard, unlike China. "China is very attractive and very inexpensive, but the rules change, so when the time comes to sell, you may be talking about an entirely different situation," Ma. explains.
Taxes are also an important consideration. "Hong Kong has no capital gains tax, so when people sell, if they do have any appreciation, they can just walk away with the proceeds," Ma. notes. Few other countries have such liberal tax regimes, so buyers must ensure they understand the local provisions.
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History may also give some pause. Many buyers were burned in the Asian financial crisis of 1997, and some worry that such a disaster could strike again, notes Monique Pronove, country managing director of property consultant Pronove Tai & Associates in the Philippines. Prior to the crisis, some Americans hungry for a deal pre-bought condominium units in uncompleted towers in Manila (foreigners cannot buy land in the Philippines). When the crisis hit, many of the developers went under, leaving those buyers in the lurch. Much the same happened in Jakarta, where half-completed buildings still stand empty. For those weighing alternatives in the region, Ma. says, "The best of all worlds is a growing economy with a growing GDP and a growing GDP per capita . That means I have a better chance of getting appreciation for my property when I do sell,"
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Because the cost of property in the region is extremely low-a condo facing the ocean goes for $50,000 in parts of Asia–some buyers simply see it as worth the gamble. "The dollar amount is so small that some people figure in the worst-case scenario if they have to write it off, they write it off," Ma. notes, ”Where in the States can you buy anything for $ 50,000?"
H. Austin Esfandiary, who owns a call-center business and splits his time between the U.S. and the Philippines, found a condominium development in a prime part of Manila and pre-bought a one-bedroom unit for about $50,000. The project, the St. Francis, is still under construction. Although it will not be finished for another two or three years, units similar to his are now going for around $70,000, and Esfandiary expects they will jump to $90,000 in a few years. At any time, he notes, "I can either sell it or rent it without any difficulty."
But, Esfandiary concedes that it is too early to call his investment a success: "I’m told by my Realtor that it’s going to be one of Manila’s premier properties, so I’m very excited by my purchase-as of right now."
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