Tuesday, 22 August 2017

3 Things You Must Know Before Buying International Real Estate

Written by Mikkie Mills Posted On Thursday, 19 January 2017 21:12

While the international real estate market may have enjoyed several months of uninterrupted growth, many investors have begun to sell luxury properties amid fear that increasing prices will create a bubble. This worrying trend, among others, means you need to be sober when considering property purchase options in the international market. Here are three major things that you must know before buying international real estate so as to be safe from these adverse market dynamics.

Idiosyncrasies Abound

While it has never been easier to buy and own home in the international market, every real estate market has idiosyncrasies, and some of them are actually pleasant. The 30-year, fixed mortgages and tax-deductible mortgage interests make it possible to lock-in your financing costs in the U.S.

On the other hand, some of these dynamics are a rude shock. If you are a non-US resident and decide to sell your home in Canada, your lawyer is required to withhold between 25 percent and 50 percent of your sales proceeds until the government is convinced that you have fully settled your tax bill.

Another source of surprises is building standards. For example, many people know that asbestos and lead paint, which cause lung cancer and brain damage respectively, are common in old homes around the world. But asbestos is still being used in the United States and lead paint is sold in 40 countries in Latin America, Eastern Europe, Asia, and Africa.

Furthermore, attitudes toward home ownership also differ significantly. Most people consider real estate in Hong Kong as a store of wealth and a commodity that can be traded. Housing is, however, considered as a social good, like health care and clean air, in other places.

These attitudinal differences also affect new developments. If you buy a new, luxury flat in London, you might be shocked to learn that the flat is next to social housing for low-income people or other less privileged individuals.

Heterogeneous Markets

There are several economic, legal, and customary variations at different levels in the housing market. Louisiana and Quebec, for instance, are civil law jurisdictions in common law countries.

This nature of international markets applies to the attractiveness of markets as an investor. In viable some real estate markets such as New Zealand and Vancouver, single family homes differ from condos and new condos are not the same as old ones. Some people will tell you that a particular city is a great buy for various reasons. If that happens to you, ask for information on what specific market they are describing, and why it's so attractive. According to Foxbusiness, you should ask the right questions, and while at it, find out the source of the data given that not all sources are credible.

Demographic Opportunities

Demographics create not only threats but also great opportunities in the international real estate market. In the United States and Canada, for instance, many people born between 1946 and 1964 have invested a large portion of their finances in their own homes, and they plan on selling them to pay for their retirement. At the same time, there are a few people who are succeeding in cohorts. Many of these individuals are saddled with both low-paying jobs and large student loans. This trend shows that there will be a glut of single-family homes and few home buyers coupled with depressing prizes as the baby boomers downsize.

Demographics are shaping housing markets as well. The population of Western Europe, China, and Japan are aging, and most women in these regions are having fewer children. Also, some countries have increased migration. Today, approximately 2.5 million people of Turkish origin reside in Germany and other countries like Hokkaido Japan are working towards raising a mallet, grayer population.

But demographics also present great opportunities. In most wealthy countries with aging populations, for example, the demand for recreational properties is extremely high. Senior-friendly activities such as tennis are more likely to increase in value than those that attract few retirees such as rock-climbing and ski resorts.

The Bottom Line

If you have never bought international real estate, the truth of the matter is that you have to do more due diligence so as to avoid a misstep. You need to have these three things at your fingertips always and work closely with your lawyer and a qualified, honest, real estate agent to make the right decisions.

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