Singapore and Hong Kong are the most expensive property investment destinations for foreigners, claims a new report by local property experts.
The main reason is huge hikes in taxes for expat investors, according to international property consultants Knight Frank.
The study highlights expat investors in the Asia pacific have to pay a ‘foreigner tax’ on property, which ranges from higher income tax in Australia to enhanced stamp duty rates in Singapore and Hong Kong.
Malaysia also imposes a special capital gains tax on foreign investors.
The information comes from research looking at the tax burden on investment property across different countries in the region.
Tax burden
The detailed analysis explains the different taxes, rates and thresholds in each major Asia pacific property market and concludes Singapore and Hong Kong stand out as the most expensive markets for expat property investors.
The main reason is extra taxes designed to stop speculators flipping properties to prevent buy to sell purchasers snapping up new build homes off-plan and then selling them at a profit.
“Looking at yields is one way of calculating a return on investment, but property investors also need to understand how taxes on purchase, owning and selling properties will affect their returns as well,” said a spokesman for the firm.
“The tax landscape has changed around the world following the downturn and we’re still waiting to see how tax information swapping will change the picture.
“Governments have looked at closing loopholes and collecting more revenue and property is a traditional market politicians look to for raising more money when the books need balancing.”
The report shows that buying a typical luxury apartment in Singapore or Hong Kong for around £330,000 now and selling after five years is likely to mean paying 30% of the value in tax in Singapore and around 20% in Hong Kong.
Skyscrapers
Both cities also have the highest annual property tax burden of around 16% of the home value.
For the full report, please click here.
Meanwhile, the firm also notes that Hong Kong skyscrapers are the most expensive real estate in the world – costing around £4,195 per square foot.
The price is around 50% more than the second most expensive city – Tokyo.
“Developers have no choice other than to build up because land is so scarce and expensive in Hong Kong,” said a spokesman. “As a result of building costs and demand, the price is forever going up.”
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