Investment Property in Australasia

Summary: Interest is intensifying among British and American expatriates currently resident and working in China, Japan and Hong Kong in the investment property markets of Southeast Asia.

Interest is intensifying among British and American expatriates currently resident and working in China, Japan and Hong Kong in the investment property markets of Southeast Asia.

Previously such investors were mainly attracted to Australia, but now as they worry about continued potential for growth in Australia their focus is broadening.

Add to these investors the numbers of Chinese, Japanese and Hong Kong locals who are seeking second homes in an Asian paradise away from the hustle and bustle and cramped conditions of their city lives, and the numbers buying up parts of Thailand, the Philippines and Malaysia instead of Sydney, Melbourne or Brisbane are on the up.

But with immigration laws tight and complicated, foreign ownership laws restrictive, build quality sometimes dubious, crime levels increasing and a non-existent resale market, are the realities of buying investment property in Southeast Asia at all positive? 

Is it possible that the rewards can really far outweigh the potential penalties and pitfalls?  And with a market as strong, as tried and tested as Australia’s real estate market is there any point in looking further afield?

Looking on the positive side for Southeast Asia’s appeal there’s no getting away from the fact that the lush and intriguing jungles and the stunning white sandy beaches of Southeast Asia are a universal draw, and that the Thai, Filipino and Malaysian people are friendly, laid back and on the whole very welcoming.  But the penalties and pitfalls in these countries include legal systems and property ownership rights stacked in favour of local people, residence and freehold property ownership tricky to achieve and then there are the angles of investment protection, value for money and potential returns to consider as well. 

Wouldn’t it be far better for an investor, rat race escapee or retiree seeking investment property in this region to just continue to head straight for Australia?  Or does the recent interest rate rise in Australia make housing less affordable, less in demand and less likely to return significant profits?

Some believe Australia continues to offer the strongest and most attractive property market in Australasia; others are massively in favour of all that Thailand, the Philippines and Malaysia have to offer.  After all achieving residence in Australia is equally as hard as it is in these other countries and even more costly, furthermore the property market in the country has increased swiftly and some say it is precariously balanced on the brink of a negative correction. 

According to real estate experts focusing on Australasia an investor will still get far more for their money and far better investment potential in Australia than they will in Thailand though.  Property prices in Thailand are increasing, interest in the market is intensifying and yet the resale market in the country is stagnant with stories of people only selling their property after having had it on the market for 10 years not uncommon. 

Thailand also prevents foreigners from owning real estate in the country outright.  As with the regulations in the Philippines, for a foreigner to purchase land or property in either country a local person or company has to have the majority share.  Of course there are usually ways around such legislation with law firms holding the required 51% share on paper only.  Some are accepting of this restriction and the ways around it, others are put off by the precarious nature of the necessary transactions!

In terms of acquiring residency in Thailand or the Philippines the rules tend to change depending on the size of the applicant’s bank account!  For example, if you’re heading for retirement and you’d like to retire to Thailand the authorities will give you a one year renewable visa allowing you to live but not work in the country if you can prove you have around USD 20,000 in a Thai bank account.  Others find ways around the system by entering the country on a short term tourist visa which they keep renewing for example, but this system is nothing if not unreliable!

Malaysia seems to offer more in terms of investment protection and value for money, and they have a well developed system for foreigners seeking to retire or purchase property in the country as well.  The country’s legal system is based on the British system which inspires a certain degree of confidence in potential property investors from the start.  The real estate market in the country is also buoyant.

Malaysia runs a scheme designed to make foreign ownership of property in the country not only attractive but relatively easy to attain as well.  The scheme which is known as “My Second Home,” allows foreigners of any age to buy up land or property in the country and to move their family and even a maid into the country on renewable five year visas and even to import certain items including a car tax free.

To qualify for the scheme an individual investor must have around USD 26,000 on deposit in a Malaysian account or have a regular monthly wage of USD 1,800 and must not work in the country.  Property prices in the country are good with room for improvement in the market allowing for strong investment growth potential and furthermore foreigners can get mortgages for properties in the country from local financial institutions, whereas mortgages are pretty much impossible to raise for a property in Thailand for example.

In terms of crime and security fears it’s generally accepted that foreign residents should seek properties enclosed in gated communities, surrounded by secure walls and/or protected by security guards in countries such as the Philippines and Thailand but Malaysia and Australia are both considered far more secure.

Most of those foreign residents who have already made their homes in the exotic paradise like locations of Thailand, Malaysia and the Philippines will extol the virtues of laid back living, a fantastic climate, excellent food, very friendly local people and a quality of life not achievable elsewhere.  So perhaps the realities of buying investment property in Southeast Asia are far from idyllic, but the quality of life achievable from life in Southeast Asia is most certainly highly enviable!

Whether these markets offer a real alternative to the tried and tested market in Australia is debateable on the one hand, and on the other the future growth and stability of the Australian investment property market is also debateable.  Anyone interested in the region is most definitely advised to do their homework carefully and travel to the areas they are interested in to speak to property experts on the ground.

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