Overcoming Forex Concerns When Buying Overseas Properties
The audience knitted their brows in concentration as Ku Swee Yong touched on the “first principles” of property investing.
Known for his widely-read and sometimes contrarian views in the media, the real estate veteran was responding to a basic question at the Invest Asia Property Show by PropertyGuru on July 30: Why even invest in foreign property?
One could almost hear minds whirring in the ballroom of the Sands Expo & Convention Centre as the audience pondered the question with the Director and Key Executive Officer of real estate advisory International Property Advisor. Indeed, life as a property investor can take some effort – from researching and renting to surveying and selling.
Ku’s poser was but one of many riveting moments in the final panel of the two-day event, titled “Navigating the International Real Estate Portfolio During a Recession: Considerations for Singaporean Buyers”.
The Forex Question
One of the first principles, said Ku, was whether overseas properties offered higher returns than those in Singapore, and how high interest rates are in these countries.
This is especially so given the looming threat of a global recession. How this impacts interest rates, and consequently currencies, is a fundamental concern for investors.
One participant, for instance, was worried that a depreciation in the investment country’s currency might “wipe out” one’s capital gains. “How do we evaluate forex risks?” he asked.
“(Looking at) forex is like using a short-term gauge to play a very long-term game,” responded panellist Sean Tan Iherng, a Malaysian YouTuber who produces content on real estate. In other words, forex investors who are in it for the long haul should not be too perturbed by short-term currency fluctuations.
Ku also advised the audience not to be overly concerned with forex rates. It should not be a deterrent to diversifying one’s property portfolio overseas, he explained, since investing solely in Singapore real estate may not guarantee yields either.
Nonetheless, he offered a way to overcome the forex obstacle – by taking a loan in the country’s currency to buy property there. This way, there is no forex loss due to the conversion process.
Moderator Winston Lee, Director of Special Projects at PropertyGuru Group, also offered his two cents’ worth. “Invest in a country or city that you enjoy travelling to,” he said. By doing so, one would keep a stash of money in that currency for use there. “(Forex) doesn’t matter as long as you don’t convert,” he quipped.
Rising Regional Prospects
With the forex question out of the way, the panellists gave their take on the markets to look out for.
Sunchai Kooakachai, Director and Head of Research & Advisory at real estate firm Knight Frank, Thailand, put his money on his home country.
“Location, location, location,” he cited the common refrain, as he singled out the Lumpini Park and Thonglor areas in Bangkok as choice buys. “If you choose a location that is good for tourists and locals, I’m sure you will get a yield of more than 5 per cent,” he said.
Similarly, Tan advised investors to go for homes that appeal to both domestic and foreign buyers. Highlighting places like Penang, which has been buoyant due to its manufacturing and healthcare sectors, he recommended foreign buyers to buy landed properties due to strong local demand.
“When you invest in Malaysia, think like a Malaysian,” he said. “It is a dream for Penang locals to buy landed property.”
For Tan’s fans, who know him as simply Iherng, these were pearls of advice. One of them was engineer Wong Kai Xian, who had travelled from Johor Bahru to listen to him speak.
The 26-year-old Malaysian, who has purchased two properties in Kuala Lumpur, appreciated the candid sharing by the panellists and is eyeing more of such investments. “It will only be more difficult to purchase properties next time due to rising costs and limited land,” he said.
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