Beyond tried and tested: Should Singaporeans start looking for new property markets?

For many who live in shoe-box apartments in first-world cities like Singapore, the idea of owning a spacious property overseas at an attractive cost often proves too tempting to ignore.

With tighter curbs on local property investments in various forms of cooling-off measures, a strong Sing dollar, rising property prices in Singapore and the market being flushed with liquidity, many investors are looking for better yielding opportunities for their money.

According to the Wealth Report 2012 by Knight Frank, Singaporeans rank among the top 10 buyers of prime overseas holiday homes, alongside nationals of larger advanced economies such as the US and Germany.

The report also noted that investors based in Singapore are increasingly attracted to potential opportunities overseas as the local market takes a breather.

Potential price appreciation, income guarantees, low interest rates and favourable exchange rates are some of the main factors attracting these investors to overseas markets. While mainstream investors go after proximity favourites such as Malaysia and Australia, the more experienced investors are looking further afield, to London and the US.

As the Knight Frank’s report notes, for international buyers, including Asians, the lack of supply across prime markets in Europe and the US, which have pushed real estate prices higher, is now encouraging buyers to look for properties elsewhere.

As wealth creation through luxury property investments becomes more global, the issues of exchange rate volatility, better opportunities elsewhere and security concerns increase in importance for high net-worth individuals (HNWIs), and compete with the more usual motives, such as investment and lifestyle. This has led to the growth of capital flight and the desire for safe-haven locations elsewhere in the world.

Emerging markets have influenced performance far and wide, with wealth in-flow to the world’s more developed property hotspots driving growth in the markets like Miami, London and Vancouver. With those prime real estate markets getting saturated; it becomes more attractive for investors to venture to new markets beyond their more familiar territories.

It all boils down to the principles of supply and demand and of short term and longer term investment strategies. Those who favour short-term, low risk investments will consider markets that have established demand but more modest yields, whereas those who favour longer-term strategies will consider new property markets that have greater growth potential, and which may lead to higher yields.

One such new property market is The Bahamas. With many US cities, including New York and Washington DC, with direct flights of less than 3-hours and Miami just a fast 45-minuteflight away, Nassau– the capital of The Bahamas, is a dream destination with crystal blue waters and smooth sandy beaches. But more than that, with a small population of about 350,000, The Bahamas offers the luxury of space and relaxed lifestyle.

With its well-regulated business environment and its status as a tax-free country, Bahamas attracts HNWIs from different parts of the world. The ability to enjoy free property rental income and the absence of capital gains tax, inheritance tax or withholding tax on dividends create important incentives which help boost the appeal of
Bahamas.

For Asian investors, including Singaporeans, growing trade ties with the Caribbean nations including The Bahamas is another pulling factor. According to the Asian Development Bank (ADB), Asia is the second largest trading partner of the Latin America/Caribbean region after US, with more than a 20% share. Trade between Asia and the Latin America/Caribbean markets grew at more than 20% per annum over the past decade, reaching an estimated
$442 billion in 2011.

Not only has the volume of trade increased, but Asian lenders such as China’s Export-Import Bank, are expanding their footprints in the region and investing in non-traditional sectors.

For instance, Exim Bank is the main lender for Baha Mar, the US$3.5 billion megaresort and entertainment development project in The Bahamas, and China State Construction and Engineering Company is the General Contractor building what is currently the largest single- phase resort project in the Western Hemisphere.

Emphasising its strong connection to the Chinese Bank and China State Construction, 307 residential units of Baha Mar are being marketed in Asia as a new Caribbean destination ‘for Asians by Asians’ with sales opening first in Asia even before its launch in other parts of the world.

Sound, well-funded and luxury resort projects like Baha Mar can be a lucrative alternative investment opportunity for those desiring to venture into new markets, especially in those countries which also offer permanent residency status for property buyers, as does The Bahamas. The Bahamas might be an unfamiliar market for some Asian buyers, but safe, investment opportunities– like Baha Mar, offer significant attraction for savvy, experienced investors, who can ‘carpe diem’ or seize the day.

Richard English, Senior Vice President, Baha Mar Ltd