New to overseas property? A real estate lawyer explains how to navigate these markets



While most of us think that nothing is more stable in international investment than real estate in the United States, let’s put the differences in perspective by focusing on three gorillas in this area.

I would like to highlight three key differences between real estate investing in New York and cities like Hong Kong and London. By analyzing transfer taxes, property type and currency risk, we begin to notice discrepancies. In addition, it is important to consider that New York, London and Hong Kong have slightly different legal systems and transaction processes.

  1. Transfer taxes
    It is very important to be aware of transfer taxes and other costs of doing business in each market. Property transfer taxes are particularly high in London. For example, they can exceed 17% for properties over £ 1,500,000. In addition, Hong Kong has a property transfer tax of 15% plus an additional 15% for foreigners. Hong Kong is one of the worst markets for foreign investment due to high foreign transfer taxes. In addition, New York has fairly low transfer taxes compared to London and Hong Kong.
  2. Property type
    Always remember whether you are buying simple interest (full ownership) or just rental (property only, not land) interest. There are many differences when it comes to these two types of property. To obtain the right to own real estate, you must pay a commission annually, even if this is the minimum amount, for renting land from a tenant. In London, some tenants are private individuals along with the government. In Hong Kong, on the other hand, all land is leased from the government and the lease expires in 2047. This leads to a high purchase risk. in Hong Kong because there is a chance, albeit small, that the government will not renew the lease. Most of the residential real estate in New York is not owned on a lease basis, but on a simple fee basis.
  3. Currency risk
    Buying property abroad can expose you to significant foreign exchange risk. Owning an asset denominated in a foreign currency exposes you to the risk of fluctuations in the local currency rate. For example, if you buy real estate in Hong Kong, you will be at high risk in the Hong Kong dollar. This is in contrast to the US dollar, which is considered by many to be the most stable currency in the world. To reduce your risk when buying internationally, you should target very stable currency markets. A qualified lawyer is essential for the efficient execution of your transaction and will help you navigate the markets due to the differences described above. An experienced lawyer will make sure that all your documents are filed correctly. In addition, a lawyer is responsible for drafting and reviewing contracts from an international perspective, taking into account immigration, tax and property issues. This is not the place a person will ever look to save money. In doing this job for 25 years, I can tell stories of local lawyers who have never dealt with international buyers.

When traveling to various international markets, you should try to use experienced brokers in the respective markets to help you find the right property. Well-connected brokers are experts who have access to off-market real estate and have an expert understanding of the true value of real estate. In addition, top brokers often have special connections with top lawyers, tax professionals and other service professionals with experience in assisting international clients.

It is very important to make sure that you are buying property from a reputable seller, especially if it is new construction. If you buy a project from a dubious developer, you risk not only losing money, but also investing additional funds to correct his mistakes. There is a possibility of poor-quality construction and other problems, such as a delay in the delivery of the project. In addition, the developer is not authorized to supply a product equivalent to what was promised at the time of purchase. A lead broker can help you find projects that are created by quality developers in the relevant city, and an experienced lawyer should grasp most of the other seller’s due diligence issues.

As society becomes more globalized, wealthy families are expanding their international real estate portfolios. In addition, amid political turmoil in many developing countries, many of these families are expanding their international holdings by purchasing properties in London, Hong Kong and New York. Investing in real estate in these markets is much safer than keeping your investments in your home country.

Investing in real estate in New York, London and Hong Kong has advantages and disadvantages. When investing around the world, the most important differences to consider are transfer taxes and other closing costs, property type and foreign exchange risk. Based on these differences, New York is likely to be the most stable investment of the three cities. Lower property transfer taxes, stricter building codes and higher prevalence of simple ownership for a fee are all important aspects of the New York City market that are driving up the value of urban real estate and signaling a resurgence in the market.

Written by Edward Alexander Mermelstein

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