Equity Magazine August 2017 Issue

SPONSORED
Words by Richard Bradstock, Head of IP Global, Middle East
in the next 12 months, compared to Hong Kong, Singapore,
China and the UK.
The YouGov study clearly highlighted a strong appetite
for offshore property investment. However, choosing the
right market for your investment is key. At IP Global our
approach involves extensive research and due diligence
that can be best summarised by the ‘PIE’ acronym;
understanding each market’s population, infrastructure
and economy before making our recommendations to
clients. The simple reason for this is that as a location’s
population grows so does demand for dwellings, driving
property prices upward. Additionally, a government’s
approach to regeneration and improvement to transport
infrastructure often correlates with rising population
density, further increasing an asset’s value. Finally, a stable
and robust economy with diverse industries and growing
employment levels makes for a perfect investment
opportunity. However, before purchasing property
further, due diligence is required. Investors should
consider how easily you can extract your profit; researching
the income, capital gains and inheritance tax implications
of investing in foreign markets. Another important factor
to investigate is the process of obtaining mortgage finance
in international markets. For example, properties in Berlin
are now extremely popular because, in comparison to
British properties, they do not undergo capital gains tax
after ten years.
Although a market may make an attractive investment,
when purchasing overseas properties, it is important to
understand the entire purchase process, including the legal
and tax implications for foreign investors. Variables such
as how and when to apply for a mortgage should be
considered as the procedure changes significantly as per
each country’s jurisdiction which can present a challenge
in unfamiliar markets. A trusted mortgage advisor to guide
you through the process is often an invaluable partner. As
a foreign investor, it is also important to consider the
exchange rate and how currency fluctuations might affect
the investment in the medium-to-long term. Currently, the
strengthening US Dollar, combined with a post-Brexit
world, makes it cheaper for investors to buy properties
abroad residing in countries like the UAE, which is pegged
to the US Dollar. Once the purchasing logistics have been
confirmed, potential investors also need to conduct their
due diligence on their partners on the ground, assessing
the credentials of all involved, from the developer to
agents and lettings, to the property management teams.
Additionally, they must understand the local rental market
to ensure there is strong demand and future saleability
prospects. Again, choose your partners wisely – ensure
you are working with advisors that have a strong track
record of success.
Choosing a buy-to-let property can enable investors to
repay their mortgage via the proceeds of their rental income.
We have seen customer buying behaviour change in the last
decade, as due to recent world events investors are becoming
more cautious. Now our clients do not tend to buy trophy
properties outright, but use their budget instead buy multiple
properties in numerous locations – using mortgage as
leverage to maximise their returns and enable their money to
go further. On the other hand, many clients do possess the
total cost of purchase. Yet we would continue to promote the
strategic advantages of leveraging (borrowing money). By
using leverage to finance their investment, investors with a
large amount could not only buy more than one property but
buy types of property that they could not otherwise afford.
For example, a recent analysis of IP Global’s London
property portfolio found the return on property investment
was magnified 2.7 times on average using this strategy.
Once investors have bought their property it is
important to constantly asses the value and progression of
your portfolio and if necessary re-evaluate your strategy
whilst simultaneously managing tenants and property
upkeep. The majority of UAE residents come to the region
on a contract basis and so when the time is right, we advise
our clients to plan their exit strategy. By purchasing
overseas this gives you more freedom but, overall, we
recommend a seven-to-ten year minimum hold on an
investment property. To the majority of investors, the
legal, mental and financial implications of purchasing
overseas properties can be quite daunting. Therefore,
most rely on companies like IP Global, which has both
local and global expertise in research, consulting, working
with solicitors and facilitating the purchase and
conveyancing, arranging mortgages, lettings and managing
the property as well as advising on the optimal time for
reselling.
Ultimately, the advantage of acquiring offshore property is
that it provides continuous reliable returns through capital
growth and rental yields, whilst giving investors a passive
income with minimal active management. Individuals
wanting to drive their net worth, property is the most reliable
asset and with the existing opportunity to monopolise on the
strengthened US Dollar, the time to buy is now.
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