Real property investment involves a serious amount of money and as investors you need to be tactful when selecting the country you want to invest in. While it is true property investment opportunities sometimes exist in countries with uncertain economic conditions, you still need to carefully calculate the risks involved. Failing to do so may result in suffering the same fate that befell other property investors. Below is a list of places you might want to avoid when buying investment properties in 2019. This is not permanent though since it can always change as various conditions affecting property investments improve overtime.
British Virgin Islands
For a territory famous for its beaches where the rich and famous frolic, you would be in awe why its residential real estate market is not that good. It’s no wonder why property market analysts are doing their best to advice investors to hold off any plan to buy rental properties in British Virgin Islands. For one, rental income in the island is very poor. This is understandable as people who come to the island have no intention of staying beyond their limited number of days of vacation.
The monthly rent that visitors who might wish to stay in one of the apartments should expect to pay is around US$2,000 on the average. The average yield, however, is only around 2.85%. For those wishing to buy investment property in the British Virgin Islands, you can expect to pay at least US$2 million for such property. The country has no capital gains.
The sudden dive of the Turkish Lira a few months ago sparked a surge in foreign investor purchases of Istanbul apartments. Market observers note that many of these property investors came from Gulf states in the region. Property analysts conclude that these investors perhaps are attracted by the almost 40% depreciation of the local currency against the US dollar. This came about after the country’s row with the United States, which in turn resulted in a massive sell-off of the Turkish Lira. Though all of these may have driven property prices down which attracted a throng of property investors, a sudden rise in inflation can occur, triggering a host of negative economic results, foremost of which is market recession. Such can further drive property prices down with investors discovering the property they bought a few months ago valued at only a fourth of its original price today.
At present, with average yield of around 2.2%, property investors can expect rental income of anywhere between €3.20 and €7.30 per square. Thus, a 2 bedroom 70m2 flat can earn the investor from €224 to €511 in rent each month. Aside from the 2.2% stamp duty that a seller and buyer must equally pay in Turkey, the seller needs to pay capital gains tax based on the amount of the profit made from the sale. It is calculated by subtracting the property’s declared original purchase price from its declared sales value, with the profit made being subjected to capital gains tax. If the profit from such sale is less than 5,000 Turkish Lira, there is no capital gains tax. However, if it is more than 6,000 but not more than 7,000 TL, the seller should pay 15%. A profit of 40,000 Lira and above is subject to 35% CGT.
Taiwan is famous for its electronics industry, food and night market. World-renowned companies like Acer, Asus, and HTC all originated from Taiwan. The country is also known for Taipei 101, one of the top ten tallest buildings in the world at 508 m with 101 floors. With the vibrant economy and throngs of people flocking to this city, it’s surprising indeed when property investors avoid it like a plague. Those who did not heed the warning learned how disadvantageous it is for them to invest in a Taiwan property. While it may be true that Taiwan is the only Chinese territory where foreigners can buy and own freehold property, its real estate prices may be out of touch with reality.
A Taipei investment property can cost investors around US$7,000 per square meter. This means that a 100m2, 2-bedroom flat can cost you US$700,000. You can already buy a house and lot with that amount In the United States and many places elsewhere. To make matters worse, a Taiwanese local earns only US$1,500 on the average, meaning in order to afford the outrageous price of a flat, they would have to save all their money for 40 year to afford such flat. As if that isn’t enough, the average yield for a rental property is only around 1.5%, something that any serious property investor would definitely avoid. Depending on the period of holding, capital gains tax in Taiwan can range from 35% to 45%.
The rent prices of regular flats in Vienna are among the most attractive in Europe, which is actually good from a renter’s point of view. Capped at €7.50 per month for each square metre of living space, an average flat can cost a renter about €525 monthly. While this has attracted renters to flock to Vienna and try their luck at various income opportunities, the same has killed the rental investor market. Investment property owners cannot rent out their high-end apartments at a high price when there are always old properties that cost less for the renters. If you are an investor who seek to buy an investment property in Vienna, the most you can expect from your investment is to break even. How so? This is because the gross rental yields, or the return on investment on a property before expenses, are not that good.
The average yield of an investment property in Vienna is around 2.16%. The capital gains of properties bought as of March 31, 2002 are subjected to a flat tax rate of 27.50%. Capital gains in Vienna are calculated by subtracting the acquisition costs and expenses from its selling price. Sellers are allowed to decrease the capital gain by 2% or up to a maximum of 50% as inflation reduction after a holding period of 10 years.
Tel Aviv, Israel
Another country which property investors may avoid at the moment is Tel Aviv in Israel. The reason is simple. Rental properties are very expensive and the yields are not substantial enough to guarantee a good return on investment. Over the years, the real property prices in Israel shot up. It’s not surprising for you to find a rental property that is priced at US$10,000 to US$21,000 per square meter. Such steep price can cost investors more than what they bargained for.
Average 2-bed flat rental rate can be from US$26.64 to US$57.25 per month but the yield may be as low as 1.70$ to 4.58%. A 100m2 can cost investors anywhere between US$100,000 and US$17,149. The current capital gains tax imposed on the seller of the property is at 25%. However, if the property was sold way back in November of 2001, it can become subject of a 50$ depending on the time the property was purchased.
When talking about France, what immediately comes to mind is the Eiffel Tower, the Louvre, wine, and many other things the country is known for. Most tourists that go to Europe always ensure France is included in their itinerary. Investments opportunities abound in France, though sadly not in terms of property investment. While investors may not have any trouble with leasing their rental property, the rental yields may not be that attractive after all. For a country that’s overflowing with tourist arrivals each year, you would expect its residential real estate market to be flourishing. However, the opposite seem to be happening.
The average yield that a property investor can expect at most is 2% or even lower. In fact, there are property investors who report the annual yield on their rental property is as low as 1.5%, unarguably one of the lowest not only in Europe but the entire world. Rental for an average flat in France is from a low of €7,021 to as high as €12,796 of per square meter per month. The French capital gains tax is at 36.2%.
New Delhi, India
One of the requisites of investment property buyers is that the population where the property is located should be high and robust. It’s quite surprising therefore when most property investors avoid the fifth most populous city in the world. India may not be as economically strong as the United States or Britain
Although property prices may have grown strongly in India in the last couple of years, its rental rates remained almost stagnant. This is why the gross rental yield also remains an all-time low in New Delhi.
The average cost per square meter of a regular 2-bed flat in New Delhi is 5.40 with a yield ranging from 1.90% to 2.19%. Property investors who want to buy a rental property in India, specifically New Delhi, should expect to pay an average of US$3181.80 per square meter. This means a 100m2 rental property can cost you an average of US$318,180, which can already buy you a modest home in many developed countries. The short term capital gains tax on sale of New Delhi properties can be as much as 30% while the long term capital gains tax is at 20%.
Oftentimes regarded as the Switzerland of Asia as it plays host to dozens of banks opting to make the city-state their Asian hub, the country enjoys a vibrant and robust economy. As property investor, you would seriously consider buying properties there. However, property market analysts are of a different opinion. While they may want to buy a Singapore condominium for their own personal use, having it as a rental property where they could earn income is out of the question. The main reason for this is that Singapore properties are considered one of the priciest in Asia.
A 120m2 condominium unit in Singapore can cost property investors an average of US$1,649,760.00, which is already more than substantial for a 120m2 in the US and the United Kingdom. Its 200 square meter condo unit is even pricier at US$2,666,760.00. With an average yield of only 2.59% per annum, property investors should be prepared to wait for a very long time to break even on their property purchase. There is no capital gains tax in Singapore.
The inclusion of Berlin in the ten cities that property investors should avoid in 2019 might come as a surprise to most. After all, Berlin is touted as among the places in the world where property prices are soaring fast. This is largely to the influx of foreign buyers who were attracted by the cheap borrowing rates in the city and its rapidly-growing population. Nevertheless, property market analysts see Berlin as a bubble that is getting ready to burst. In fact, it was found out that Berlin properties are overpriced by as much as 35% of its original value. This prompted the country’s central bank, the Bundesbank, to issue as warning to property market players.
Today, the average rental price of a regular 2 bed flat in Berlin costs around EUR500 to EUR1,500. Investors wanting to purchase apartment buildings in Berlin must prepare to pay capital gains tax of 2.6% to 6% which oftentimes depend on the location of the property. A multiplier is then applied to the percentage calculation. Investors must also expect an average yield of only around 2.5% in rental income each year out of its original value.
Japan, with its beautiful monuments, colorful blossoms and high technology living is a beautiful place to visit if you’re looking for a place to tour. It’s a place where tradition and modern way of living meet. Japan is also a perfect example of total efficiency where passenger trains and busses arrive exactly on time. In terms of property investments, however, it may not be so bright after all for investors. While major cities in Japan do offer moderate rental yields on regular 2-bedroom flats, the needed maintenance for such place may just eat away any projected income.
Property prices are a bit pricey, though lower than many other global cities. Property investors should expect to pay an average of US$14,000 for every square meter of a flat. This means that a 140m2 can cost US$140,000, still expensive but lesser than some neighboring countries. Rent income can vary starting from a low of US$26.72 to a high of US$36.22 per square meter for each month. Its average yield per annum is approximately 3%, a moderate rate for investors though as mentioned earlier, the needed maintenance may just eat hugely into the profits. The capital gains tax on sale of residential property in Japan is 15%, though this rate could still change depending on circumstances. Such circumstances include the holding period, costs incurred at time of sale, depreciation, and many more.
While it is indeed true that investing your money on a rental property instead of letting it rot in the bank is a wise move, you still need to make a careful determination. Not every country can offer you the best returns on your investments. As discussed during the beginning part of the article, it doesn’t mean that when a country is economically rich, its rental property market is also great. Before you proceed with the purchase, you must first in everything that can impact your investment property. This way, you wouldn’t be on the losing end.