Acquiring property is one of the best ways to build long-term wealth as well as diversify your asset portfolio. Diversification is an investment strategy that allows you to put money in different investments for an increased chance at success. After all, maximizing your yield potential is better than investing all your money in one investment that may or may not give you the desired results. According to the Economist, property prices in America are continuing to rise despite the economic downturn caused by the coronavirus.
Many people expected the current global recession to mimic The Great Recession of 2007-2009 when housing prices in America plummeted by 10%, but in fact, the opposite remains true. While The Great Recession led to the housing bubble bursting, the economic recession caused by the coronavirus is seeing housing prices pick up, even in other middle to high income countries. In America, interest rates have fallen significantly, with Americans being able to receive a 30-year mortgage at 2.9% as compared to 3.7% last year, making it easier for some to purchase property. While this is so, house prices are rising as mortgages decrease, and the lack of demand coupled with the lack of supply for real estate is impacting the market significantly. This may encourage potential buyers to invest in property outside of the country, where real estate is more affordable and where American buyers have leverage due to the strength of the US dollar.
Here are the top 3 countries Americans should consider buying real estate in:
Brazil is one of the countries that has been hardest hit by the COVID-19 pandemic, and this has had a huge impact on the real estate industry in the country, causing demand to decrease. However, recently, Brazil’s real estate has seen some improvement. According to Brazil’s House Asking Price Index, FipeZap, which tracks the prices and sales of real estate in the country, house price indices rose by 1.45% in August 2020 compared to the previous year. This has been FipeZap’s best performance since 2015, with 19 successive months of year-on-year growth.
Real Estate Brazil states that in July 2020, São Paulo’s real estate market saw an expansion of 21%, which indicates the rising demand for Brazilian real estate. This can be attributed to interest rates being at a historic-low, encouraging people to invest in tangible assets that are guaranteed to appreciate over time, especially seeing that the year 2020 has emphasized the importance of sound and profitable investments as life tends to be unpredictable.
According to Where In Rio, the real estate industry in Brazil is one of the fastest growing
internationally with high demand. Due to the high influx of foreigners, the government has created new laws to encourage more foreigners to invest in the Brazilian real estate industry. There are many benefits for foreigners who wish to invest in the country’s real estate industry, with international retirees that earn above a certain threshold being granted permanent residence. Other benefits for investing in the Brazilian property market include a simplified purchasing procedure, significant tax cuts, security, an opportunity for growth, an affordable cost of living including healthcare, and the opportunity to revel in the beauty and rich history of Brazil.
The purchasing procedure in Brazil starts off with making a verbal offer to the seller, usually through their real estate agent. This differs from the procedure in America, which is often quite formalized. After the verbal offer is made and accepted by all parties, claiming a tax ID through what Brazil terms a CPF card, is done for tax purposes. This is usually carried out by the real estate agent, although appointing an attorney to register for one on your behalf is recommended. Subsequent to this, a final offer will be drawn up by the real estate agent. The offer is most likely going to be written in Portuguese, so it’s worth noting that you should ask for an English version so that you fully comprehend what you are signing. Your lawyer should also go through the agreement and explain it to you thoroughly, as well as oversee the entire process and ensure that a deposit is paid to secure the deal (usually 10%). A title deed will then be prepared by a notary, which you will have to register with a property notary. The final payment is then transferred to the owner.
Brazil’s transfer tax duties are 2% and in America, they vary from state to state, although they can be lower than 2%. However, because property in Brazil tends to be way more affordable than in America, you will likely end up paying less in transfer fees. Legislation by the Brazilian government also prevents foreigners from incurring double taxation on any property purchased, and the only restrictions imposed on foreign real estate investors are for those buying rural land for agriculture. Closing costs in the country amount to 4% of the selling price, including any legal fees and insurance fees incurred. The law also allows the deferral of capital gains tax, which is approximately 15%, to be reinvested into another property. Property tax is usually about 0.5% to 1.5%.
To give you a clearer picture of the affordability of Brazilian real estate, a beachside apartment can be a little over $100,000. Not to mention, the country’s beautiful scenery, rich history and diversity, friendly nature, and various cultural celebrations will make it easier for you to settle in should you ever decide to move here. The cost of living is extremely affordable and healthcare is free for all Brazilian citizens and foreigners.
Thailand is a great option for Americans to considering to buy real estate overseas. The
country’s demand and supply for real estate is slowly rising, with construction activity growing. At the moment, the return on rentals stands at 8.05% and although the coronavirus has had noticeable effects on the country’s economy, the Bank of Thailand’s slashing of interest rates to reduce the effects of the coronavirus has helped the economy as well as made it easier to purchase property in Thailand. Despite this, the closure of international borders has made the country’s international interest in the property market extremely slow, due to foreign buyers being unable to enter the country and purchase property.
With Thailand’s repo rate being at 0.5% and a surplus of properties available on the market, buying a property in Thailand seems viable when international travel restrictions are lifted, especially considering that there are few restrictions for foreign property buyers in the country. One thing to note, however, is that the country prohibits foreigners from buying land freehold, although there are other methods that could allow foreigners to purchase land, which include setting up a private company in Thailand with part Thai ownership or opting for a 30-year leasehold ownership. Foreigners are also only permitted to purchase condos and apartments and even though buying property gives you ownership of the property itself, it doesn’t grant you ownership of the land by law. Furthermore, Thai law does not allow foreigners to receive mortgages from Thai banks, so any purchasing of property will have to be done in cash. Whichever path you decide to take when purchasing property in Thailand, it’s very important to do adequate research and appoint a real estate lawyer.
Transfer fees in Thailand range from 0.01% to 2% and the deposit required to make a purchase is the standard 10%. This amount is non-refundable unless the seller cancels the sale, which would require them to reimburse the buyer with double the deposit amount. A stamp duty of 0.5%, a registration fee of 2% and special business tax of 3.30% is also factored when purchasing real estate in Thailand. The documents needed for a property transaction are a passport and an exchange control form — that’s if you’re purchasing privately — there are a different set of forms required if you are buying property through a company.
The property industry in Thailand is mostly unregulated, so the necessity of a qualified real estate lawyer has to be emphasized. It’s also important to be able to confirm the condition of a property prior to signing any documents and paying a deposit or any other fees. Closing a deal can take 30 to 60 days, and at the end of the process, title deeds are submitted for registration and payment of government duties.
The average price for a condo in the city of Bangkok is $207,322, although prices will be
cheaper when you seek property away from main cities. Thailand is a beautiful country,
surrounded by serene nature. The weather is one of its highlights, as is the delicious and
culturally rich foods. Should you decide to relocate to Thailand, the healthcare system is quite affordable and is internationally recognized as one of the world’s best healthcare systems.
Turkey is rated as one of the world’s best countries to purchase real estate in as a foreigner, having beat countries such as Portugal, Spain and Greece. This is due to the ever-growing tourism market, its predicted property industry growth as well as the affordability of the country’s real estate. In order to attract foreign investors, Turkey enacted the reciprocity principle for foreign buyers. This principle states that foreigners who purchase real estate in Turkey can only do so if their country of origin allows Turkish citizens to purchase property in their countries under the same conditions. Many countries have entered into this agreement with Turkey, although the list tends to fluctuate. Since the enactment of this law, Turkey saw real estate investments for foreigners soar.
Foreign investments in Turkey’s property market are predicted to rise, despite the negative effects of the coronavirus pandemic. This in itself displays how hardy the country’s property market is, with $15 billion estimated to be generated by the Turkish tourism industry at the end of the year. The more tourists in the country, the more foreign real estate investors. In addition to Turkey’s tourism growth, affordable real estate and laws that attract foreign investors, the cost of living, income taxes and transaction costs are also very appealing to outsiders. It’s also relatively simple to acquire a residence permit when purchasing property.
The process for purchasing property in Turkey includes making a preliminary application in order to receive a date for the transfer transactions between the buyer and seller. The seller’s title deed, buyer’s passport, a property value statement document, mandatory earthquake insurance policy, two photos of the buyer and one of the seller, a Turkish-English translator and a copy of the power of attorney are required. There are some restrictions on purchasing certain types of property as a foreigner in Turkey, and it’s always best to work with a reputable property consultancy company, Turkish translator and of course, a real estate lawyer.
To compare the affordability of real estate in foreign countries, a study showed that the average amount a foreigner can purchase real estate in Turkey is €120,000, whereas this figure jumps to €400,000 in European countries like Portugal and Spain. Not to mention, the strength of the US dollar plays in your favor as an American buyer because one Turkish lira (at the time of writing this article) equates to about 0.13 USD.
Turkey is a cultured country and ethnically mixed. The people are welcoming, particularly in metropolitan cities like Istanbul, and this helps with regards to integrating into the culture should you decide to move there permanently. You can also decide to rent your Turkish property out as a holiday home, and maybe opt for retiring in the country at a later stage, as many retirees have this country listed as their top retirement destination. The lifestyle in Turkey is simply unmatched.
For Americans looking for affordable and profitable real estate investments, consider investing in real estate in foreign countries such as Brazil, Thailand and Turkey. It is worth looking into as the benefits provided by the strength of the US dollar as well as the various countries real estate laws for foreign buyers are extensive.