Dateline: Kuala Lumpur, Malaysia
You could throw a stone and hit twenty new office and residential skyscrapers being built in Kuala Lumpur, Malaysia.
Go practically anywhere in this city or its suburbs, and you’ll see almost never-ending growth, with each new building offering almost the exact same pitch: “live above it all”.
It looks like real estate developers around the world have conspired to market their condo projects in the exact same way.
Malaysia’s real estate market may seem to be an attractive investment for foreigners, especially those holding US dollars.
While Malaysia does check a lot of boxes – a place to live and an easy second residency through the Malaysia MM2H Visa, the property market here is recovering.
We recently looked at a chart called “Country growth potential indicators” from Global Property Guide. Now while we don’t agree with everything they put out, this is interesting as it shows the expected real GDP growth rate for private investment in a number of countries over the next five years.
We will be sharing our thoughts on some of the results.
We’ve pulled the analytical data and backed it up with the cultural analysis so you know what to expect when investing in a country. Numbers alone don’t tell the entire story of a country’s growth, where it stands in the global economy, and whether it can continue or not.
Of the fastest-growing countries according to this report, several stand out as being of interest to international investors. Here are our picks.
Panama
Global Property Guide analysts expect 14.3% growth in the next five years according to IMF projections. Panama seems to have bounced back from the heavy Covid restrictions. The country’s export levels are predicted to grow around 5-6% per year.
Panama is one of the top expat investment destinations, and for a good reason. Property rights are strong, the location is easy to get to, and Panama is one of the freest countries in the world.
For investors, Panama is not just a safe haven, but a haven for returns. Yields on residential property are as high as 7.3%, making them among the highest in the “safe” world. Capital gains tax rates are relatively low even if property taxes are a little aggressive.
For North American expats looking to establish a safe real estate investment overseas, Panama makes a lot of sense. One strategy would be to buy a home now and enjoy several years of yield before using the property to qualify for a second residency.
In terms of long-term rental yields, there is potential for over 10% gross earnings this year. However, those numbers will probably come down a bit amidst growing purchase prices per square meter. There is a trend of square meter price increases for sales since March 2021, whilst rental prices per square meter have stayed relatively flat.
Construction activity has also picked up after Covid as sales of concrete (in volume) are approximately 10% more than compared to 2021. This indicates a sign of a recovering industry. An increase in total construction cost and m2 built is also to be expected compared to last year.
If you’re a US citizen, you can exempt up to $500,000 in capital gains if you live in a property for two of five years, making an investment in Panama real estate not only a high-yield property but a potential tax-free home as well.
Indonesia
Although Indonesia feels like a far less developed version of Malaysia, it’s now one of Asia-Pacific’s most vibrant markets and has emerged as a confident middle-income country, according to the World Bank.
Here in Kuala Lumpur, people queue up in an orderly fashion, whereas Jakarta is often pure chaos. That said, there are similarities between the neighboring countries in that both have suffered a currency devaluation.
The first time we visited Indonesia, one US dollar got you about 9,000 Indonesian rupees. Today, it gets you around 15,400, and the trajectory does not look good. If you can get comfortable with a certain exchange rate, Indonesia is not a bad country to look into.
While Indonesia has a number of relatively complex laws regarding foreign property ownership, foreigners can own condominiums and in some highly bureaucratic cases “landed property” (also known as a “house”).
The big thing to consider in countries like Indonesia is that locals with any means at all tend to distrust their currency in a big way; they’d be crazy not to. While US dollar holdings are popular, Asians love investing in real estate as a safe alternative to banks and currencies they see as weak.
In that way, property prices have gone up, even if inflation has eaten up some of the headline rates. Indonesia is a tricky place to invest and would require caution to do so. However, for the right investor who wanted to take advantage of the slumping currency, there may be some opportunities.
Cambodia
We’ve gone on record as saying: “If you’re going to invest in Asian real estate, invest in Cambodia”. The reason is simple: prices are low and the potential is enormous. Global Property Guide suggests 23.18% capital growth in the mid-term, but this is one case where we think they may be a little conservative for the average retail investor.
Now, we don’t expect Cambodia to be a top investors’ pick forever. For now, however, you can purchase a decent-sized apartment in the city center for as little as $40,000. We came up with an aggressive “50/20/100” strategy that involved buying a property for $50,000, renovating it for $20,000, and selling it for $100,000 within the first 6-12 months.
That kind of math won’t work forever, but we’ve seen it working now, even if $50,000 has crept up to $53,000. One of our acquaintances has even started a fund that allows investors to pool as little as $25,000 into buying and selling Cambodian properties.
For longer-term investments, it’s important to keep in mind the capital gains tax that is currently said to come into effect in 2024 (but has been already delayed multiple times) which might affect the market in the coming years depending on the effects of the economic downturn in Cambodia. If the crisis will be severe for Cambodia, people might be eager to sell their properties sooner rather than later which in turn would bring the prices down even more.
Currently, annual rental yields in Cambodia of between 6% and 8% are still very much attainable. While the country is far from formal in terms of property deals, there are a few companies there that are trustworthy and really know their stuff. The side benefit of investing in Cambodia is that the government basically leaves you alone.
Georgia
Georgia is one of the easiest countries in the world to do business in. We’ve gone so far as to say it could well be “the next America”. Perhaps no other post-Soviet country has done so much to reform its economy, crack down on corruption, and open its market to foreign investment.
Foreigners can invest in any type of real estate in Georgia with the exception of property with an agricultural deed. Even in many of these cases, it is possible to purchase the property if the seller is able to re-title the property for commercial use.
Georgia has experienced a 1% rise to GEL500k gross income per year for individual entrepreneurs with small business status for specific types of businesses, e.g. freelancers involved in marketing, software developers, and it also has attracted multiple companies all over the world to relocate to Georgia, particularly in the IT field, because there is a special international company status which grants international companies the possibility to pay 5% corporate tax (on the level of company taxation) and 5% personal income tax on salaries for their employees.
Right now, even after the construction prices went up, Georgia has some deals. There are some local investors who do basic finishes to new construction and sell the completed product to foreign investors looking for turnkey solutions, although we find this a little too easy for our liking.
In addition to real estate investing, Georgia offers nearly limitless prospects for entrepreneurs looking to start a business. While the number of trendy restaurants and boutique hotels has been on the rise, Georgia is one of those countries where the population seems eager for western-style online businesses that innovate the market.
Opportunity in Georgia is wide open and we have recently reversed our opposition to buying property there provided you do your homework, making it a smart play for investors who want a pro-business country to park their cash in.
Paraguay
Getting a second residency and citizenship in Paraguay is known as one of the best picks. But it is also of potential interest to investors who have a small amount of money to invest in a growing if not almost enigmatic South American country. While the government welcomes entrepreneurial investment from abroad, there are factors hindering the venue climate.
For years, investors have talked about cheap “bolthole” properties in Paraguay, with some costing as little as $5,000 to hold on deposit while residency is completed. Today, prices have gone up, but it’s still possible to buy cheap lots and land for low prices. We were recently sent a deal to buy some land for only $11,000; it was so cheap that we almost did it just as a fun weekend project.
Paraguay’s economy is open and free, although in a slightly different way than you’d find in Panama, for instance. Property rights are not considered as strong, but the opportunity for capital appreciation is high.
Paraguay is home to seemingly endless agricultural and grazing lands, which could make for a great investment for someone seeking to invest in agriculture.
While the most productive lands require hands-on management, the opportunity to benefit from appreciating agricultural land prices or to use your investment as a “Plan B” for your own family’s food production makes Paraguay an interesting choice.
Colombia
Colombia is a highly underrated country considering it has the fourth freest economy in South America behind Chile, Uruguay, and Peru. Given that Chile has started down the path of socialism, Colombia may be the best investment in the Latin world today.
Mention “investing in Colombia” to anyone where you live, and chances are you’d get odd looks from people who thought you were buying up land to enter the drug business. Sadly, Colombia’s reputation still precedes it, affecting valuations.
That can work to your advantage as the country is still being punished for an issue that was brought back into sharp focus as a result of the pandemic. Our CEO got an apartment there himself.
In addition to a 9.74% projected growth rate, Colombia offers even small investors the opportunity to apply for residency and future citizenship. We expect yields to be above average and mid-term gains to be very good in Medellin in particular.
Prices in Bogota have gotten a little out of hand in some cases, although the utter thwacking of the Colombian peso has made a lot of real estate almost stupid cheap.
One other country that we are cautiously optimistic about is Turkey. The politics there aren’t great now, but it’s still a safe haven for the Middle East, with an 18.34% growth suggested over the next five years.
There are a number of countries the report suggests will experience negative capital growth over the next five years, including Macau, Qatar, and The Bahamas.
Investing internationally is a great way to diversify your portfolio when you do so for the right reasons. Beyond the asset protection benefits that foreign real estate provides, we believe that the countries listed here will do well if you make the right investment.
Here’s where we come in. Our specialist team offers holistic plans to seven- and eight-figure entrepreneurs and investors. Let us guide you toward financial freedom and legal tax reduction.
