Investing in property abroad


  • Business
  • Saturday, 04 Jan 2003

By THEAN LEE CHENG

JASON Tan, 34, started investing in Australian properties in 1995, two years before the financial crisis pulled the rug from under the feet of Asia. Today, he has one property in Malaysia, one in Singapore and six in Australia. He lives in Malaysia and has worked for a couple of years in Singapore.  

Tan is among some Malaysians who wanted more than an adventure abroad. He wants personal space in another country. In the next 10 years, he aims to have a total of 15 properties abroad, all almost fully paid-up with each property averaging around A$500,000, or a portfolio worth A$7.5 million.  

“These properties should generate about A$30,000 per unit per year, so my total income should be A$450,000 annually for my retirement as well as for my children’s education,” says the father of two, a four and a six-year-old.  

Tan contends that Malaysia is a good place to invest. “I don’t want to put all my eggs in one basket. I want to diversify.” That is the prevailing philosophy when one hits the overseas property trail. 

Malaysians’ interest in overseas property markets was piqued in the 1990s. Of course, some invested earlier. In the last decade or so, English properties were niche, Australian in vogue. 

Today, Australian properties are the most fashionable. Global Link Realty senior investment consultant Norman Sia says 90 per cent of Malaysians who buy overseas today buy Australian. 

Two years ago, they started buying New Zealand real estate. It was not that the gravitational pull from Antarctic was stronger, just that British sterling was more expensive. 

Sia says: “Malaysians are generally comfortable with a cash outlay of A$100,000 (RM200,000). What can you get for £40,000? A one to two-bedroom apartment in Docklands is £200,000. 

With so many zeros after the conversion, Malaysians can be forgiven for being thrifty.  

In truth, Malaysians’ penchant for overseas properties started with England. Call it the colonial pull. 

CY Harta principal Cheng Yi says 1993 was the overseas properties boom year. They all went English. At that time, the pound was about RM3 to a pound, compared with RM6 today. 

Cheng Yi has not gotten his fingers in the overseas property pie then. He only went international in 1996. Whether he is thumping his chest in sorrow, that is another matter. 

“It was very easy selling overseas properties in the early 1990s. It was almost like a local launch with people milling around and snapping up units.” 

Things have changed. Nothing sadistic about this but it is impossible not to go back in time to 1997/98 when the Asian financial crisis hit home. After all, those two years and the ensuing ones did cause many hearts to flutter. That was the region’s watershed. 

“When the crisis hit, it was harder to market overseas properties. While people wanted to diversify, many were also reeling in shock. Those who were still standing wanted to diversify because the region seems really bleak but uncertainties caused many to pause. And then came the capital controls in 1998. That made it even harder to market overseas properties,” recalls Cheng Yi who has been in realty for seven years. 

Procrastination never did one any good, it seems because those who owned some couple of hundred square feet of England are now rubbing their hands in glee.  

“Whoever bought into London five years ago – or even Sydney or Melbourne – would be laughing to the bank now. Two years ago, a friend bought a High Street, Kensington property for £400,000. Today, it’s a 30 per cent to 40 per cent gain.” 

In retrospect, it is easy to thump our chests in grief and say: “I should have bought.” 

While there are many such souls, they are also those who blindly bought even without having set foot in the country they bought into and lost, although they are unlikely to say so. 

“You’ll be surprised. People you don’t expect to buy, buy. Those, whom you expect to buy, don’t. And there is another category who attends every launch and say, ‘Should have bought. Now its X per cent more expensive.” And with each subsequent launch, the price will only go up,” says Cheng Yi. 

While the people who buy do not differ greatly in terms of professional profile, depending on whom one talks to, they differ in the reason for making that purchase. 

Jason Tan bought because he wanted an income source that would enable him to keep the lifestyle he wanted. He was also planning for his children’s future. There were just too many barriers in the local market, he says. 

Global Link’s Sia says most of his clients buy to invest. Before the 1997/98 crisis, they went for short-term gains. Now, they go for long-term gains, which make them very selective. Thirty per cent of his clients are professionals, 50 per cent are businessmen, 20 per cent per cent mixed. 

Over at C Y Harta, Cheng Yi says 40 per cent of his clients buy overseas for investment and rental returns, 40 per cent for their children who study abroad while 10 per cent want a holiday home. The remaining 10 per cent simply do not want all their eggs in one basket. 

Frontier PDI Sdn Bhd managing director Ng Swee Kian who set up shop about 20 months ago says among his clients who bought into overseas properties, education was the main draw with the investment component because there are many universities in that city. 

“Most of them have children studying there or relatives in Melbourne,” says Ng. 

Over at Reapfield, 60 per cent of its buyers are Malaysians who buy into Australia emigrate, and the remaining 40 per cent to invest. For New Zealand realty, 80 per cent buy to emigrate, 20 per cent to invest, says its chief executive officer T.L. Lau. 

Whether it is building a nest egg for the family as in Jason’s case or to quit the country as the case may be, buying overseas is decision that is more than a car-ride away. One may have to be a frequent flyer. 

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