Fact: millionaires can become billionaires by investing smartly. They diversify their portfolio by making informed choices between various asset classes, real estate included. Buying the right property, at the right time, and in the right location is a powerful wealth-building tool across the globe. This is no different for high and ultra-high net-worth individuals (HNIs & UHNIs) in India.
Dig deeper, and you will discover that well-off Indians have made overseas real estate a critical part of diversifying their wealth portfolio. It’s no longer a ‘would be nice to do so’, but a ‘should be done’ commandment of a healthy investment portfolio.
Investing in overseas real estate has several positives. It aids geographical de-risking of investments and helps in currency diversification, be it GBP or USD. Developed markets are usually less volatile and offer better rental yields. To sum it all up, with an approximate 4%-5% capital appreciation, a rental yield of 3%-4% and a currency appreciation of 2%-3% annually, returns on overseas property investments have the potential to deliver early double digit returns over the medium to long term.
Investors can remit upto $250,000 overseas every financial year via the liberalised remittances scheme also known as the LRS. Incidentally, this is also that time of the year when wealthy Indians have the opportunity to double up and send $250,000 until March, 2021 and add another $250,000 to this investment sum in April. Armed with the $500,000 capital, and $1 million if you add another family member we believe this is a great time to look at some of the hottest global realty destinations to build an overseas real estate portfolio. Here are our top 5 picks:
Despite the pandemic, there has been an overwhelmingly increased interest for real estate in London as the U.K. announced a stamp duty holiday for purchases up to £500,000 for first time buyers, providing an additional saving of upto £15,000. With a sustained demand for London real estate over the course of last year, the average price for a property in London has now surpassed £500,000 for the first time. Buyers continue to make a beeline for homes in London with the stamp duty holiday right up to March 31, 2021. We believe London's property market looks poised to be the wealthy Indians' most favoured destination.
If there is one gateway city which nips close on the heels of London, it’s New York. Amongst the world’s gateway cities, New York seems to be one of the most well priced with New York City nearing the bottom in this current cycle. In one of Manhattan’s prime locations, with a budget of $500,000, you can purchase an excellent studio apartment, or a 1 BHK of about 550 square feet approximately.
And it isn’t surprising that there is an increased urgency from buyers, a surge in viewing requests, and multiple offers from sellers seen recently, which is a strong indicator that the market is poised to move upwards. Median sale prices in Manhattan have already firmed up by about 4% year over year, from $1 million in the December 2019 quarter, to $1.04 million in the last quarter of 2020.
This bohemian, culturally evolved city in mid-United States is now enjoying its day under the sun. With the announcement of Elon Musk moving from Los Angeles to Austin in order to build his estimated $1 billion Cybertruck factory, and several other big tech firms—from Apple, to Facebook, and Oracle, Hewlett Packard, DropBox Inc, etc.—trading places from the Bay Area to Austin, this southern U.S. city has been renamed the “Silicon Hill.”
U.S. News & World Report’s Best Places to Live survey has ranked Austin as number one city for four consecutive years. Austin has collected other several badges of honours, which includes America’s Best Job Market, Wall Street Journal 2020 number one ranking, and many more. The city’s real estate has already seen a decent up move and continues to be one of the most desirable destinations to live in, with both property prices and cost of living far more affordable than Palo Alto or New York.
This incredibly beautiful, cosmopolitan, South Florida city makes it to the top five, effortlessly! If Austin is the next tech hub, Miami has grabbed the attention of the finance and startup world. The city managed to grab $1 billion of venture funding in 2020, according to Crunchbase data. Several Wall Street bankers and fund managers have relocated to Miami.
The city’s list of new corporate residents includes Blackstone, Starwood Capital, Goldman Sachs, Virtu Financial, and Elliott Management. The rush of real estate is reflected in the prices. The median sale price of luxury homes in West Palm Beach, Miami, have risen 14% year-on-year to $1.8 million in December 2020, the biggest jump since 2018. For the well-heeled Indian, the beach city of Miami is perfect to catch the sunshine.
Factors such as access to superior medical facilities, welfare benefits to citizens in times of uncertainty, tax incentives, good infrastructure, and a stable economy have become key in defining the search for Citizenship by Investment (CBI), through real estate. Lisbon in Portugal checks all the boxes.
This beautiful European destination has caught the imagination of the luxury home buyer over the last five years. Visa-free travel throughout Europe, superior quality of life, coupled with education and employment opportunities, while planning for the children’s future, have made Lisbon a hotspot. The flexibility of Portugal's CBI programme has emerged as a winner for Asians, including Indian families. Perhaps that’s why home prices in Portugal have risen almost 6% in 2020. Property in the Lisbon Metropolitan Area are the most sought after, and one can find good investment opportunities in Chiado, Príncipe Real, and Avenida da Liberdade to name a few.
The pandemic has allowed many UHNIs to reflect on their life choices of ‘where is home’ and ‘what is freedom of movement’. For the affluent Indian looking for a value buy and a global lifestyle, a pick of any of these top 5 cities could be a well-timed investment decision in 2021. For the ultra-wealthy, real estate has always been a powerful wealth building tool, and it's no different for the savvy Indian buyer.
Views are personal. The author is director, international, India Sotheby’s International Realty.