Should You Still Invest in Overseas Real Estate?
Investing in overseas real estate is a good idea in the majority of cases. Investing in real estate is like this by default, but by buying property overseas you can get some extra benefits, for example, win on a weaker currency.
Of course, there are many factors one needs to consider when purchasing property abroad, with international politics being one of the most important. Brexit and its far-reaching impact on the global economy is proof of that.
However, if you are clever about it and time your purchase right, this can become one of your most successful investment projects.
Benefits of Investing in Overseas Real Estate
The most obvious benefit of investing in property overseas is the diversification of your portfolio. Choosing the place wisely also allows you to not only collect on higher rental yields, but also win on currency exchange rates.
Bear in mind that the same currency exchange can cause great financial losses. Therefore, investors should consider using money transfer services that do not only offer low transfer rates and FX margins but also provide hedging tools for minimizing risks.
Overseas property is also a good way to protect your assets and, depending on the locations, it can provide some tax benefits. In the case of great political issues or economic instability, like the uncertainty caused by Brexit, owning an asset that provides you with regular income in a location unimpeded by these issues can be life-changing.
All in all, it’s not surprising that this type of real estate investment is booming today. And with a general drop in property prices as well as easily accessible mortgages, it has boomed in the last couple of decades.
Who Is Investing in Overseas Property?
The international real estate investment market is international in every sense of the word. Many people realize the benefits of this investment, so there are people owning property abroad in every country.
However, an attentive observer can notice some more pronounced trends. For example, Americans are more fond of investing domestically, which isn’t a surprise considering the size and diversity of their country.
The Brits, on the other hand, prefer purchasing property in Europe. Holiday homes in Spain and France are particularly popular. Transferring money and assets to Spain makes more sense today due to the stability of the currency and lower prices on the real estate market. The South of France, the best region for a holiday home in this country, has some of the highest property prices in the world.
Recently, the Chinese have also become extremely active in the international real estate market. They are purchasing properties all over the world. They are doing it regardless of the political resistance they face, quickly becoming one of the biggest players on the global real estate arena.
How Politics Shape the Overseas Real Estate Investment Market
One important factor that overseas investors need to keep in mind at all times is that in the globalized world of today, everything is connected. This means that every event, which causes the certainty levels to go down, will affect every market, not just the local one.
The latest political instability in many regions, and major events like Brexit, made international property investment less appealing to many. This trend affected multiple countries causing some important changes on the local markets.
For example, real estate prices in the UAE have gone down rapidly in 2019, showing record-breaking drops in some areas. The reduction of foreign real estate investment may have only a limited impact in this particular country. However, it will be a major blow for some.
Many developing economies strive on attracting investors. Some countries, like India, even go as far as to change legislation in order to make it easier for foreign investors to purchase property in the country.
However, this will hardly help them if investors aren’t willing to take the risk. Speaking of Brexit, because of the rapid weakening on the GBP after its initial announcement in 2016, the currency has yet to regain its position. This means that nearly overnight purchasing property abroad has become much more expensive for the Brits.
Fluctuations of the foreign currency exchange rates always have a major impact on the international real estate investment industry. That’s because for all the benefits of this investment the profit margin on it isn’t very high. And a currency drop like the one pulled by GBP can erase it and even turn an asset into a money drain.
The matter of Brexit, in particular, will keep impacting the global real estate market. And because of the uncertainty associated with it, no one can make any solid predictions for the extent of this impact.
The world is already feeling the strain caused by the reduction in the number of British overseas investors. This impact is most pronounced in the EU, which attracted millions of property buyers from the UK.
Now, regardless of the exact terms of Brexit, there can be no doubt that the number of Britons buying property in the EU isn’t going to go back up. It might increase, but because of the higher taxes and other issues, it’s impossible to believe that this rate of investment will ever return to its former level.
One shouldn’t forget that the terms for non-EU members are never as good. In fact, you might be facing prices, taxes, and fees that are up to 30% higher as opposed to those offered to EU member states residents. Who would want to buy a property under these terms?
However, as the Britons’ interest in purchasing holiday homes in warmer climes remains high, other property markets might win from this situation. It’s always like this with the global market. Something that is unfordable to some brings advantages to others. The very same GBP drop caused by the Brexit announcement made it more lucrative for people who want to repatriate their funds and return to Britain.
Therefore, the golden rule of the international real estate investment market is to always remain on alert. Diversification is your friend because having a big portfolio will protect you from the big problems caused by uncertainties that result from major political and economic events.