Why should i buy property in emerging markets like Cambodia?
Property investment in emerging markets are typically seen as investments with higher risks, yet they also come with higher potential returns.
However, investment in emerging markets has seen an increasingly safe investment environments while benefiting from more attractive capital growth rates than developed markets.
Moreover, the pricing of the investment is only seen as a fraction as compared to developed markets which yield higher return on investment.
And currently, a slowdown in economic growth in particularly visible across many developed markets, which can lead to uncertainty in capital growth and yields as compared to staggering economic growth that countries like Cambodia can achieve.
Is now a good time to start buying property in emerging markets?
Economic uncertainty has knocked confidence among investor everywhere, but it is believe that Asia remains the global growth engine and the fastest developing region in the world. Cambodia, for example has performed well in the past year. We are witnessing an increase in positive sentiment and overall confidence.
How easy is it to invest in property in Cambodia?
When it comes to high-rise condominiums and low-rise residential terrace houses, Cambodia is no longer in its infancy.
There is an indication of 12.9 million sqft of development set to enter the market by 2018 as the pace of construction is “booming”.
Projects are estimated to be able to fetch a net yield of about 5- 6 % rental yield. Some notable projects like The Peak and The Bridge by Singapore Mainboard listed developer Oxley and also The Gateway by Singapore Tiong Aik Developer, have gained strong presence and support from local and foreign buyers for their modern and trendy design, as well as located at prime area.
Ease for investing in Cambodia properties come typically easy since 2010 condominium law, for instance, allows foreigners to own condominium apartments through freehold strata title tenure, although it is restricted to 70% of the total units within an individual building from the first floor up.
What are the typical risks involved when it comes to investing in property overseas?
Additional risks come with property investments in a foreign country compared with those made locally.
These includes foreign exchange and political risks.
If the currency of the country that your property is in depreciates against the Singdollars, the gains made by your investment will be eroded even if your property value rises. However, Cambodia property investment come in US Dollars which provides investor with a safer currency.
Investments may also be affected by any political instability or policy changes in the country you purchase property in.
How much of my portfolio should be invested in emerging market properties, and why?
Investors should allocated their capital according to their risk appetite. Emerging markets real estate could be considered from an institutional investors’ point of view, not only because of global uncertainties but also because of diversification benefits.
Direct real estate investment opportunities are bulky, unique and require long holding periods. They should therefore be judged based on their own merits as an when they become available, regardless of the cycle the local property market is in.
Retail investors on the other hand, should consider both securities and direct real estate to balance their risk profile.
What do i need to do before buying into a project in an emerging market ? How can i make sure my investment is secure?
Doing your homework is the key.
Investors should have a good understanding of the location of the property they are buying, its employment and rental outlook and its regulations or restrictions on foreign ownership.
And if you are looking to buy residential property, always consider developers with a strong track record.
How easy is to get money out ? When should i make an exit?
One golden rule of investing oversea is to follow closely the correct procedures imposed by the local government, be it for bringing funds into the country or fulfilling the necessary tax requirements when selling the property.
Investor should always make plan for their exit strategy for the property investment.
If the investment is part of a diversified portfolio and will form part of your retirement fund, then usually a medium- to long- term strategy should be considered.
If the investor has some spare cash and wants to explore investing in emerging market, then short or medium hold may be more suitable.
At the same time, investors as a safeguard should always stay liquid.
You don’t want to be stuck in a situation where you need cash but you can’t get it out of an investment.
How do i get loan?
Financing options may be limited as not all banks finance overseas property purchases, particularly those in emerging markets.
Currently for property investment into Cambodia, Bank like Maybank Cambodia is able to finance most development up to 50% of loan quantum.
As the market continues to show signs of improvement, the difficulty is finding good-quality products. Sourcing for loans is easier part of the investment.