Overseas - Way out east

Wednesday, February 13, 2008

The Far East is booming in terms of both business and property investment. Johnny Turner sees what the property market has to offer

With the China having arrived as the world’s new economic powerhouse, an unprecedented amount of building and buying is going on in the Far East as a whole. Besides China, such destinations as Malaysia and Thailand are the recipients of a new wave of investor interest. Western buyers are now getting in on the act, putting their money into investment properties throughout Asia.

Vietnam is another such location – indeed, its popularity has forced some cooling measures. Fifty per cent property price increases since the beginning of 2007 have prompted a preliminary draft of new laws to curb bulk buying and create a sustainable market for property in Vietnam.

Property agents remarked that the government plan allowing both Vietnamese living overseas and foreign investors to own freehold property has accelerated the rush to purchase real estate for future resale and thus affected prices. Vietnam’s property prices have risen exponentially since the beginning of 2007, as more investors have shunned the stock markets in favour of the more gainful property investment market. Policymakers and economists are now pushing for the new legislation in a bid to avoid a bubble and sustain the country’s high growth rates for many years to come.

The draft proposal details measures to impose an annual tax on owners who have acquired more than one property – however, the law would not come into effect until 2010. At present only transfer taxes are payable on the sale of a property, but most sales are paid in cash making it difficult for the government to gage volumes and collect on capital gains tax.

And that means now is the time to catch the multiple-buying window in Vietnam.

Currently, scores of investors are queuing overnight to join the immense competition for off-plan property apartments, and property news has shown hundreds of buyers camping outside Singapore’s CapitaLand to pay deposits for a newly released project.
Nguyen Xuan Dao, chief executive of property developer Vietnam Property Inc, said, ‘In some areas in Hanoi and Ho Chi Min City (HCMC), especially in the luxury condominium sector, prices have tripled in the past year alone.’

Dao said local real estate companies reported projects in Hanoi and HCMC had sold out prior to completion, with developer PT Ciputra Development Tbk now selling apartments for $240,000 – up from $80,000 in the previous year.

For more information on overseas property investment, and to find out about Obelisk’s latest projects, contact Obelisk free on 0808 160 0670 or visit obeliskinternational.com.

In Malaysia, the regulation pendulum is swinging the other way. The UK market is now driving The Malaysia Ministry of Tourism’s new ‘Malaysia My Second Home’ (MM2H) programme, according to new figures.

Malaysia My Second Home is an initiative designed to encourage buyers from around the world to purchase second and third home properties in Malaysia. The UK ranked first in terms of number of participants approved on the programme in 2007 (January to August) up two rungs from its third place ranking over the past four years. There are currently 1,215 British participants on the programme, out of a total of 10,308 participants.

Positive measures taken by the Malaysian government to relax regulations imposed on the property sector have also kindled further interest in the (MM2H) programme. These include allowing foreigners to purchase any number of residential property priced above £43,265 without restriction, and an exemption from Real Property Gains Tax on profits made from the sale of residential property. Real estate prices in Malaysia are viewed as competitive and below those in other Asian countries, with prime location rates in the capital Kuala Lumpur still below £290 per square foot.

David and Barbara Miller from Scotland are thrilled with a £45,000 half-acre house they acquired near Ipoh, north of Kuala Lumpur. ‘We would never have been able to afford such a place in the Scotland, let alone handle the renovations to our fancy, and we achieved everything at a fraction of what it would have cost us back home,’ they said.

The UK is Malaysia’s best long-haul tourist-generating market, supplying 252,035 tourists in 2006. 136,429 British tourists were recorded from January to June 2007, an increase of 4.7 per cent over the same period last year. Total tourist arrivals to Malaysia from January to June 2007 numbered 10,690,426 – an increase of 24.8 per cent over the corresponding period in 2006.

According to the Ministry’s Secretary-General, Dato’ Dr Victor Wee, ‘The UK has been a traditional tourism source for us and it is thus natural that we are appealing to the baby boomer generation to consider Malaysia My Second Home programme for their retirement. Furthermore, with property prices in the UK rising to extraordinary levels, many buyers are now looking abroad to invest wisely.’

Brits are finding Malaysia more and more appealing as a long-stay destination, citing the warm tropical weather, good quality of life, low cost of living, modern infrastructure, excellent healthcare facilities, political stability, widely-spoken English, recreational facilities, multicultural population and food variety as decisive factors in their choice of Malaysia as a preferred retirement and long-stay destination.

Malaysia ranked seventh as a retirement haven in the recently-announced results of the fifth annual Global Retirement Index compiled by International Living magazine’s website, in a survey of 29 countries.
One of the incentives under the current programme is the provision of a multiple-entry, renewable social visit pass valid for ten years. For more information visit mm2h.gov.my.

China’s growth has to a large extent defined the world economy in the past decade or so, and this dominance shows no sign of abating. The once fiercely anti-market country, this mega-economy is now a huge creditor nation and the subject of massive investment. And within this fascinating country, Shanghai is growing exponentially, a powerhouse within a powerhouse. With a building programme of a scale that defies belief, little wonder that the property market in Shanghai is booming. Many have identified Shanghai as offering excellent long-term prospects and have invested there with great success.

Its economic power makes it an investment destination for several reasons: City players have been keen to invest in the Chinese currency, which has been called undervalued. Indeed, the Chinese currency is expected to grow by ten per cent in the next year, and growth of between 20 per cent and 40 per cent is forecast as China moves from the world’s fourth-largest economy to largest.

Its new World Financial Centre is another symbol of dominance, and the money flows towards these symbols. Therefore, the Pudong area, home to the World Financial Centre, has been attracting unheard-of rates of investment. Those who want even the vaguest ideas of what Shanghai will be can think of Canary Wharf and then imagine even more exponential growth.

Shanghai Vision, the leading Shanghai-based specialist in the market, points to the huge growth that has been seen already and is convinced that there is much more to come. In Shanghai, low prices are a key to excellent growth, and investors in Summit Residence have achieved 29 per cent capital growth in just one year. And with rental demand far outstripping supply, the continued need for property to rent is assured.

‘Demand is certainly strong. Apartment sales doubled in March compared with February. Enormous, growing foreign investment is bringing a massive influx of Chinese and overseas workers into the city, creating a thriving property rental market. Value growth of the property is strong at between ten and 15 per cent.

‘In addition, many City of London investors have bought for the opportunity to invest in the Chinese currency, which is seriously undervalued and providing exciting returns. The opening of Shanghai’s World Financial Centre this year - twice the size of Canary Wharf - is generating massive interest in apartments in the Pudong area.’ City of London investors see what’s happening in Shanghai as similar to the rapid growth in Wapping and Docklands properties, says Keogh.

It is not just a handful of adventurous investors. Shanghai Vision has helped 350 UK- and Ireland-based private investors buy over $100 million worth of properties in this city in the last four years. It is a growing trend. Shanghai Vision (London) property sales in Shanghai tripled in 2005, more than half of these being bought by investors who already own property there.

For the latest deals in Shanghai real estate call +353 01 637 3995 or visit shanghaivision.ie.
Thailand is known as a tropical paradise, and this reputation for luxury and natural beauty drives the dynamic of property investment in the country.

In Koh Samui, Cinnabar is a small collection of only 48 high-spec two-bedroom apartments (including 12 penthouses) being created within the exclusive Angthong Hills, which is situated above the village of Bang Po to the north-west of the Island. The land at Bang Po is zoned for residential use only and has demanded a higher than average price level on the island which has ensured that developments in this area are higher-end and more exclusive. A large percentage of the land in Bang Po is green zone and as such will not be subject to any further development.

Koh Samui itself is an idyllic holiday island in the Gulf of Thailand. It is known for its amazing beaches and wealth of activities, such as exploring exotic Buddhist temples such as the famed golden Big Buddha, elephant trekking, wonderful local markets, water sports, waterfalls. Recent additions include a shopping centre containing a superstore, shops, restaurants and cinema.

The island is easily accessible via direct flights from Bangkok, Phuket, Pattaya, Penang, Kuala Lumpur, Singapore and Hong Kong; further routes are planned for Taipei and Shanghai.

For further exploration, the islands of Koh Phangan and Koh Tao are only a short boat ride away. Koh Phangan is famous for its monthly full moon parties, which draw revellers from around the world, while Koh Tao boasts some of the world’s most fabulous diving sites.

Investors will be impressed by the island's 48-week holiday season, its average year-round room occupancy of 74 per cent, the full management programme and the high average room rates; the fact that the area has a strong secondary market within Asia provides a clear exit strategy.

Prices range from £95,000 to £110,000 including off-plan discounts; prices are expected to rise by 15 per cent this year. Construction began last year and the full infrastructure is now in place.
For more information contact 0800 977 4517 or visit fareps.co.uk.

Asia