How real estate investors can get more space with their $1m

An expert from Savills suggested that they begin looking into London.

Years ago, if you asked a Singaporean real estate investor to choose between London and Singapore as their preferred investment location, they would probably choose their hometown due to the high cost of properties in the former. Today, however, this may no longer be the case.

According to Head of Savills Global Research Paul Tostevin, Singaporean buyers can now get more space in London than in Singapore with US$1m.

“In London, you can get about 680 square feet. In Singapore, about 600 square feet,” he said.

Tostevin explained that this is possible due to the weakness of the pound to the US dollar and due to prime London prices being down 18% from its peak in 2014.

“Buyers can actually make a saving of 45%, which is clearly advantageous,” he said.

These two factors will also allow a Singaporean buyer to get 10% more space with their $1m, and 23% more space with their US$1m compared to 2021.

“There’s been an increased amount of cooling measures in the domestic Singapore market and that makes other markets the sort of natural choice in terms of alternative investment decisions, diversification of wealth,” Tostevin said.

Other locations, things to consider

Apart from London, Tostevin said other Euro-dominated markets like Paris, Berlin, Barcelona, and Milan are also good locations to invest in given the currency play.

In Asia, Dubai has slowly become an interesting market for real estate investors.

“We've seen quite strong sort of business growth and diversification in that city. Dubai has been successful in attracting digital nomads, it’s a dynamic city with a good climate, and low cost of living, fuelling the rental market in Dubai for the short term, which is obviously a good investment,” he said.

Australia, New Zealand, and Japan have also been gaining interest from Singaporean investors.

The performance of these locations in 2023 is going to vary, but the overarching headwind across all these markets is rising interest rates and inflation which can squeeze affordability, said Tostevin.

“So while you might get a little bit more for your money [in 2023], perhaps if prices do dip, it might be temporary, moving in 2024. I think the exact direction depends on the market. Some have seen very strong levels of price growth in recent years, particularly Canada, New Zealand, and Australia, and these are more kind of right for price falls, others places like Dubai, I think have more to run, particularly given the relatively underperformance they've seen in years prior,” he said.

Factors to consider

When buying or investing in properties in overseas markets, Tostevin said investors should consider wider purchasing and holding costs.

“Some have additional taxes for overseas buyers, some have particularly high holding costs that you have to consider. All of that should be factored in,” he said.

Another factor to consider when investing abroad is the market’s environmental legislation.

“The UK is a good example here. There is a minimum energy efficiency required to rent out your property. Certainly, if you’re buying a new building, that’s not an issue, because that’s built with the latest standards,” he said.

Most importantly, Tostevin said buyers must not only look into the city but its “micro market.”

“Look into things like transport infrastructure improvements. In London, we’ve had Crossrail, we’ve had Northern line extension. It’s looking at that micro-level detail to really identify those opportunities,” he said.