Global Business PDF

Global business Week 1: What is Global Business: Exchange goods/services across international borders. Companies that are global means they have many branches/offices in many countries. They have to create/market/distribute products worldwide and manage international operations. Leverage competitive...

Global business Week 1: What is Global Business: Exchange goods/services across international borders. Companies that are global means they have many branches/offices in many countries. They have to create/market/distribute products worldwide and manage international operations. Leverage competitive advantages in rapidly/interconnected world economy. Eg: Starbucks promotes sustainable/ethical practices. Cultural impact(coffee culture) where ppl meet tgt to socialise. However, competition with local coffee shops/global trade dynamics Eg: Google, Ikea Characteristics of Global Business(10) Operate in many countries meet needs of customers(markets) communicate effectively with ppl from diff languages/cultures follow trade rules/restrictions from each country manage money currency and deal with exchange rates rely on networks of suppliers from multiple countries face challenges in political and economic settings Competition(compete with local/international customers) Managing across borders(need skilled managers to make decisions/coordinate activities in diff countries) Social and environmental responsibility(consider social/environmental impacts thru their business practices). Importance of Global business(9): Economic growth(more jobs/productivity) New markets(increase sales) Knowledge sharing(exchange ideas for innovation) Cost efficiency(save money thru cheap labors/materials) competition(improve product to remain competitive) cultural exchange(understanding/connection between ppl) consumers benefits(access products easily) investment opportunities(diversify investment thru own assets/business) social responsibility(benefit society by being more sustainable/environmentally friendly) SG as a Hub for Global Business(8): Strategic locations(easy access to major global markets) Stable political and economic environment(low corruption/robust economy) Pro-business policies(grants/tax incentives so easy to start biz) skilled workforce(highly educated;talents) Ease of doing biz(transparent regulations/straightforward registration)  strong legal and financial system(biz access capital/financial services) Multicultural society(understand diff cultures) Advanced infrastructure and technology(provides necessary resources to thrive in digital economy) The Increased Globalisation of Real Estate Business(5): Capital Flows(Increased cross-border investments) Rapid urbanisation(attracts global players to capitalize on growth) Technology & PropTech(Digital platforms/virtual reality tours make property accessible to global investors) Global Supply Chains(international construction companies architects and suppliers collaborating on major projects across borders) Regulatory Reforms(relaxed ownership regulations to attract foreign investments) Manifestations of a More Global Business(5): Collaborative ventures between real estate firms and international investors Diverse investment portfolio(REITs where mix of properties in diff country) Branding & franchising of business model worldwide International property expos(property exhibitions) Education & training(global certifications in real estate for best practices) Motivations for going overseas(7): Diversification(mitigate risks and spread investment) growth opportunities(significant growth in real estate leads to higher return of investment) market penetration(increase customer base/brand/revenue) expertise and innovation(learn diff markets and stay competitive/improve) synergies and economy of scale(presence in multiple countries centralises market/research efficiently) regulatory & tax considerations(financial benefits/tax incentives to attract foreign investments) building global network(sharing knowledge/deals/resources) Types of global real estate business(7):(clients) Consultancy(advice services;investment/development) Brokerage/Agency(Help/sell/lease properties) Property management(services for day-to-day operations;maintenance/rent collection) development(plan/construction of properties) Investment and asset management(manage properties on behalf of clients;insurance companies) REITs(finance income producing real estates) PropTech(property search/transactions) Missing: competitions, rules and restrictions, cultural exchange, investment opportunities, locations, stable political and economic environment, multicultural society, skilled workforce, education and training, collaborations branding and franchising, property exhibitions, diversifications, market penetration, regulatory and tax considerations, global network Week 2: Global Real Estate Market Overview(6)(dynamics, key, characteristics, Asia pacific overview and intro, motivations) Overview: Types properties(4): Residential, commercial, industrial, agriculture Influenced by(4): local economies, regulations, cultural nuances, geographical factors Broadening horizons beyond local borders(3): access to myriad opportunities like diversifying investment portfolio, potential higher returns, benefit from currency/taxation advantages Real estate market dynamics(factors): (8)(growth/changes) Economic decision: strong economies(employment rates/income levels) lead to increase demand real estate Interest rates: When interest rate low, cheaper borrow money which increase demand real estate Government Policies: Policies promoting home ownership or foreign investment(increase demand)(e.g. Govt regulations/tax laws) Demographics: Age, income, population size affect diff types of real estate Urbanisation and Infrastructure Development: Increase demand in cities and increase property values Socio-Cultural Trends: Rise remote work influence demand office space Geopolitical Factors: Political stability, international relations, conflicts and security impact real estate markets Significant Events: Covid-19 alter ppl living and working patterns leading to shifts in property demand and price Note: These factors either amplify or mitigate impact on real estate market. Predicting future of market is uncertain and involves risk. Thus, staying updated with current trends and diversify investments will manage risk. Key Global Real Estate Markets:(attract significant investment)(6) United states:(mature, diverse, strong economy, robust demand) Most mature and diverse market with mix of commercial, residential, industrial properties. E.g. New York where strong economic and robust demand(strong/healthy, unlikely break) United Kingdom:(strong legal system, capital appreciation) Prime residential and commercial markets. Stable legal system and capital appreciation attracts global investors. E.g. manchester is hotspot for investment Australia:(strong demand) Strong demand both domestically and from foreign investors. Regulated environment(system/rule) China:(rapid urbanisation, govt regulate market) Rapid Urbanisation. Government regulate to stabilize the market. E.g. Beijing massive investment Japan:(prominent hub, market stability, strong regulations) Prominent real estate hub. Market stability and strong institutional framework(regulations). Residential markets seen sluggish growth but commercial attract investors. Middle East:(Rapid infrastructure, luxury segment, sustainability) Rapid infrastructure and luxury property segment strong. Sustainable building and smart cities. E.g dubai. Characteristics of Developing Real Estate Markets:(5)(HLHIL) Higher growth potential: Rapid urbanisation, population growth, expanding middle class lead to increase demand Less mature property markets: Create opportunities for investors navigating these challenges Higher risk and volatility: Investors cautious of Political instability , economic fluctuations, weaker legal framework Infrastructure development: Transportation, utilities, telecommunication enhance attractiveness and increase value property Lower entry prices: Property price in developing country lower than developed countries. Investors can enter with lower initial capital outlays. Note: Real Estate Markets have unique characteristics, opportunities and challenges. Characteristics of Developed Real Estate Market:(5)(SLSDA) Stability and maturity:(transparent/stable market) Markets in developed countries more stable and mature which provides transparent pricing and solid market. Lower growth potential: (Significant development, however predictable returns, lower risk) Developed may have lower growth potential than developing markets cuz they have experienced significant development and urbanisation. However, they offer predictable returns and lower levels of risk. Strong legal and regulatory frameworks:(property rights, market transparency, reduce disputes) It protects property rights and ensure market transparency. Investors reduce risk of disputes/fraud. Diverse investment opportunities: Developed countries offers wider range investment opportunity like commercial, residential, niche sectors. Access to financing: Better access to financing options like mortgage loans and real estate investment trusts(REITs) to leverage investments. Asia-Pacific Real Estate Market Overview:(7) (attractive cuz economic growth, demographic changes, urbanisation) Key trends: (good to know?) Urbanisation and Infrastructure Development: Major drivers of real estate growth Technology and innovation: Impacts real estate demands. E.g. Proptech(research, buy, sell online) Sustainability: Emphasis on sustainable and green buildings Market size and growth: Diverse and rapidly growing real estate market. E.g. India, robust growth cuz rapid urbanisation Challenges:(3)(REP) Regulatory hurdles: Foreign ownership restricted and bureaucratic(complicated rules) processes can be complex. Economic volatility: Economic uncertainties and impact geopolitical issues affect real estate market Pandemic impact: Covid -19 disrupt real estate sectors(retail/office space) Opportunities:(3)(EIU) Emerging markets: Developing countries(India) have potential due to economic growth/demographic factors Infrastructure development: Many countries invest in infrastructure, create opportunities in industrial sector Urban redevelopment: In mature market(SG), it provides real estate opportunities Quick intro to selected markets:(4)(CMVA) China:(increase population/urbanisation, residential pressure, commercial gud) Massive population and rapid urbanisation. While residential market is under pressure due to government restrictions, commercial offer opportunities driven by e-commerce. Co-working and co-living spaces influence market. Malaysia:(increase middle class/urbanisation, demand, however oversupply) Growing middle class, increase urbanisation, infrsturcture projects contribute to demand. However, investors carefully study market cuz oversupply condo in market. Vietnam: (increase urbanisation/economies, demand, however complex regulations) Fastest growing economies, increase urbanisation and strong demand residential and commercial properties. However, Complex regulations and transparency is challenge to foreign investors. Australia: (mature/stable, commitment sustainability) Mature and stable, safe bet for investors. Substantial price growth and commitment ti sustainability and green buildings(E.g. Melbourne) Motivations Investing Overseas Residential Properties:(6)(DHCELC) Diversification: (1) Diversify investment portfolio, , reduce risk and potentially improve returns Higher returns: (2) Overseas may offer higher rental yield and capital appreciation and thus more attractive return on investment(profitability)(E.g. SG) Cost and restrictions: In SG, property price high and restrictions in buying where have pay ABSD. However, overseas markets more affordable and fewer ownership restrictions Economic and Political Stability: Investors attracted to stable economies/political system as it provides more certainty for investment Lifestyle Choices and Personal Reasons: Plan invest overseas for when plan to retire cuz love culture/lifestyle/environment Currency Exchange Rate:(3) Motivating factor. Favourable currency(SG strong) lead to purchasing power OR foreign currency stronger than SG lead to boost in returns and potential house price growth(profit) Summary: Gud: Infrastructure development, urbanisation, interest rates, stability, maturity, high returns, legal framwork, investment opportunities, sustainability, entry price Ad: socio cultural trend, What affect rental yield: Economic/political stability, high returns, geopolitical/geographical/demographic, regulatory, maturity Missing: govt policies(home ownership), demographic, geopolitical, urbanisation, socio cultural trend, (US, UK, Australia, China, Japan, Middle east) mature, strong economy, robust demand, stable legal system and market, capital appreciation, regulated environment, rapid urbanisation, prominent, luxury segment strong, higher growth potential, opportunities, higher volatility, infrastructure development, lower entry price, transparent pricing, solid market, significant development/urbanisation, predictable returns and lower risk, property rights, investment opportunities, financing options, urbanisation, sustainability, robust growth, technology and innovation, restrictions and complex rules, pandemic impact, economic uncertainties, emerging economics, investment opportunities, urban redevelopment, (China, Malaysia, Vietnam, Australia), co working and co living spaces, oversupply, substantial price growth and green buildings. Diversifications, higher returns and rental yield, cost and restrictions(ABSD), lifestyle choices, currency exchange Week 3: Tips in buying foreign property Baseline: Process and rules of 1 country vs other countries Understanding risks when buying a new property Pre-development:(7) Developers Acquire Land Parcel: Necessary zoning and planning permissions Marketing Launch: Agents and developers releases glossy brochures, launch websites, host roadshow to advertise property Buyers Review Options: Potential buyers review floor plans, pricing, amenities Reservation and deposits: Interested buyers need pay deposit to secure a unit Bank Loan Pre-Approval: Buyers seek approval to have necessary financing Legal and Contractual Review: Buyers consult legal experts to review contract, terms and conditions Payment of Stamp Duties, Fees: Applicable govt fees, taxes, other charges Risks:(considerations) Is the title safe? Reputation of developer Market trend and potential for growth in the area Stage 2: Construction(5) Groundbreaking: Official start of construction Progress Updates: Regular updates from developer on progress Progressive Payments: Buyers make periodic payments according construction schedule Potential Customisation: Buyers may have options for certain customisation Monitoring Construction Quality: Buyers engage professionals to ensure construction standards are met Risks: Stage 2 How often will updates/progress reports be provided? What is construction timeline, are there penalties for delays Are there possibilities customisation during construction? Stage 3: Completion/Handover(5) Final inspection: Thorough inspection of unit to identify defects/issues Completion of Legal Formalities: Finalising legal paperwork Final payment: Adjustment or additional fees Handover of Keys: Developer hand keys and buyer takes possession of unit Interior Fit-Out: Buyers bein interior decoration as desired Risk: Stage 3 What are exact terms and conditions of final payment? What inspection and quality checks will be performed before handover What are processes for addressing any defects/issues found at time of handover? Stage 4: Post-Handover(5) Maintenance and Management: Ongoing maintenance and management fees Renting or Residing: Depend on investment strategy, either occupy unit or rent to tenants Property Taxes and Other Ongoing Costs: Continued payment of property taxes, insurance, other recurring costs Engaging in the Community: Participation in association meeting/community engagement Potential Resale: Monitor property value for resale opportunities Risks: Stage 4 What are ongoing maintenance responsibilities and costs? What insurance coverages are necessary? Can it be rented out as marketed? Foreign Property Exhibitions: Foreign developers and various real estate agencies have been marketing properties in SG over the years Council of Estate Agents(CEA): Own set of guidelines and checklists that Estate Agents and Real Estate Salesperson would adhere when marketing properties Estate Agents(EAs): Definition: Facilitate property transactions.(e.g. Property agencies/real estate agencies) Functions: Manage Real Estate Salesperson(RESs), handle more complex property transactions Licensing: With the Council for Estate agencies(CEA)for professional standard and adhere to regulations set by CEA Responsibilities: Action of associated RESs. If salesperson made error, EA could be held liable Real Estate Salesperson(RESs)(5) Definition: Perform estate agency work(e.g. Property agents/real estate agents) Functions: Connect buyers and sellers, assist in property transactions Registration: Registered with licensed EA Pass RES examination and comply with Continuing Professional Development(CPD) requirement by CEA Code of Ethics: Adhere CEA code of conduct and practice guidelines Key Differences between EAs and RESs: Licensing and regulations: EAs are licensed entities/individuals that may employ multiple RESs. RESs registered under EA and being supervised Scope of Work: EAs have broader responsibilities like oversight of RESs while RESs focus on direct interactions with clients and day-to-day transaction activities Legal Obligations: EAs have higher level responsibility and comply relevant laws and regulations. RESs follow guidelines set by EAs Reasons CEA guidelines for foreign property marketing: Incomplete delivery Overpriced, not ebay to exit Agents understand risks(outright fraud) Checklist for Buying Foreign Properties(17): Downpayment and mortgage loans: Never fail to check if the valuation is of fair value or not Find out type of loans available Ask for approval-in-principle Buying process and legal representatives  Check if the lawyer is acting for the developer, agent, agency or acting for the buyer Find out legal conveyancing and buying process Some foreign countries, safer use own lawyer Political and Social factors: Cost of maintaining and impact on property values and returns Foreign laws may change suddenly, racial riots and unrest may follow Some countries may face storm/monsoon and utilities may be cut off during these times Verify Salesperson identity: Check that salespeople are registered sales agents/representatives with CEA Make sure ppl advising are transparent and explain forms properly on the myriad forms before signing Verify the location: Do not rely on map cuz may not be to scale/distorted Visit actual site, take pics in day and night Misleading road names, postal codes, exact location Annual Rental Yield = Rental Income(p.a.) / Property Value Net Rental Yield = Rental Income(p.a.) - Property cost(p.a.) / Property Value Note:(PGMFP = Practice Guidelines on Marketing of Foreign Properties) Primary purpose of PGMFP: safeguard interests consumers considering overseas property investment NOT responsibility of EA and RES: Forecasting capital appreciation rates for property with 95% confidence level EA conduct due diligence: Foreign property developers and the foreign property projects they market EA and RES correctly: Estate Agents is agency/firm overseeing property transactions, RES is indiv salesperson licensed to assist such tasks Consumer awareness: Educate consumers abt potential risks of foreign property purchases Whom PGMFP apply: EA and RES involved in marketing foreign properties Without EA approval: RES must not market foreign market DIligence process for payment arrangement: Verify guarantees in vendor advertisement are binding by checking contractual document Unable perform checks material finding: Document these failing as part material findings for foreign property EA trains RES market foreign property: RES clearly explain all relevant process, proper advice for foreign property, Responds to enquiries/details of foreign property from customers Investing in overseas real estate(part 1) Establishing baseline: Process and rules of 1 country vs other countries. Baseline set usually home country Typical property buying process in SG:(12) Determine budget and eligibility Access funds and determine how much can afford Check eligibility buy private property based on citizenship and property ownership Engage a property agent(optional) Qualified to help buying process, property search to negotiation Property search Search properties using online platform, listing, property agent Shortlist properties based on requirement(location, size, budget) Conduct property viewings Arrange with agent/seller Access property condition, potential for growth Obtain financing Approach bank for mortgage loan Obtain Approval in Principle(AIP) to understand loan amount eligible for Submit an Option to Purchase(OTP)(legal Negotiate property price and other document for right to buy property) terms with seller Once agree, pay option fee which is legally binding Exercise OTP Within OTP validity period, sign OTP and pay remaining deposit Engage lawyer to handle property conveyancing process Apply mortgage(if required) Submit mortgage application and necessary documents to bank Complete conveyancing process Lawyer check property title and ensure no outstanding charges Lawyer prepare Sale and Purchase Agreement(SPA) and coordinate with seller layer for completion Pay Stamp Duty Pay Buyer Stamp Duty(BSD) and ABSD if applicable within 14 days after signing SPA and OTP, whichever earlier Property handover Transaction complete, arrange handover key  for possession Registration ownership Lawyer purchase property transfer with Singapore Land Authority(SLA) to obtain Certificate of Title Regulating bodies for property purchase: Monetary Authority or Central Bank Public utilities board Ministry of law, Law Society Management Corporate Strata Titles(MCST) Malaysia: Case study: Investing in Malaysia Real Estate(4) Residential property: Steady demand for landed properties especially urban centres(KL) Commercial property: Favourable investment climate, presence multinational corporations(e.g. Shophouses, office space, retails) Hospitality and tourism: Enhances demand cuz diverse culture, attract international and regional visitors(e.g. Hotel, resorts) Agricultural land: Palm oil, plantations contributing to economy(influence by domestic, global prices) Reasons invest Malaysia Real Estate:(11) Stable Market: Consistent growth potential, attractive for long term investment Diverse opportunities: Residential, commercial, agriculture Foreign Ownership friendly: Malaysia allows foreign investors to own property, even freehold(subject to regulations) Economic growth: Steady which enhances property value appreciation Strategic location: Centrally located in Southeast Asia, accessing regional markets My Second Home Program(MM2H): Attractive residency for foreign investors, encouraging long term investment Transparent land administration system: Based on Australians Torrens System No inheritance tax: Property distributed according to owners will Financing available for foreign buyers: Malaysia banks offers overseas buyer loans up to 70% Low capital gains tax:(if were to sell unit, pay 10%?) 10% if property disposed 5 years from purchase Other reasons: Growing population, good amenities, away from natural disasters Challenges:(6) Legal and Regulatory Complexity: Navigating Malaysia state-specific laws and foreign ownership restrictions Due Diligence Requirements: Property titles(legal document of transactions of specific property) clear and compliant with local regulations Market Volatility: Prices and demand fluctuate, influenced by economic factors/oversupply Financing Challenges: Stricter loans conditions for foreigners Property maintenance: Managing from abroad present logistical challenges Tax implications: Real Estate Gains Tax for foreigners Key Cities/Regions:(3) Iskandar Malaysia: Near Johor, near SG, rapidly growing economy in investment in residential, commercial, industrial Klang Valley:(including KL) High-end residential, bustling commercial centers, significant infrastructure development Penang: Mix heritage and modern living, George Town being UNESCO World Heritage site, attractive in residential and commercial sectors Land Ownership & Title:(5) Land ownership system is robust cuz Torrens system, ensuring secure property transactions Freehold Property: Perpetual ownership without time restrictions, complete control and own freehold property Leasehold Property: Typically 99 or 60 year lease and need renewal for continued ownership Landed property: Individual plots and freedom regarding property use Strata Titles: Properties with shared areas(e.g. condo)(common areas)l Foreign Ownership Restrictions: Residential properties set RM1 million for popular areas(KL) Obtain state govt approval to purchase property Overseas purchasers prohibited purchasing property special interest which built on Malay reserved Land and gazetted for Bumiputra How much would it cost: Downpayment min 10%, for foreigners 30% or higher depend on loan provided by bank Financial - Taxes and Fees:(understand budget during transaction process)(5) Stamp duty: Calculated based on market value Legal fees: Payable for legal services for SPA and loan agreement, based on scale rate Agent Fees: Payable services for real estate agent, if utilised in transaction Other fees: Mortgage insurance, valuation fee Other recurring fees: Maintenance fee, utility fee General Property Buying Process in Malaysia:(9) Property Selection and Offer: Identify property and make offer Due diligence: Checks on title and approvals Offer & Booking Fee: If offer accepted, pay booking fee not more 2.5% purchased price Signing of Agreement: Sign the sale and purchase agreement(SPA) State Authority Approval: Apply for state authority approval for foreign ownership if required Financing: Mortgage but foreigners face higher requirement and lower financial margins Payment of Stamp Duties and Fees: Based on property price and regulated scale Final payment and Transfer of Title: Upon approval on financial arrangement, pay balance purchase price and property title transferred Property Registration: Register property in name at Land Office General Investment Process for Foreign Developers: Setting Up a Foreign Company in Malaysia:(4) Company Registration with SSM: Register with Companies Commission of Malaysia(SSM) to legally operate in country Name Approval: Submit preferred company name for approval to ensure unique Incorporation Documents: Memorandum and articles of association for detailing activities in Malaysia Payment of Fees: Pay registration fees to SSM to complete incorporation process Obtaining Regulatory Approvals for Real Estate Development:(4) Local Entity Setup: Establish Malaysian entity as foreign companies need local presence to acquire land Licenses and Permits: Secure from local authority(e.g. Local Govt) Foreign Investment Compliance: Adhere foreign investment guidelines(restrictions type properties) Regulatory Approvals: Environmental impact assessment, zoning approvals Partnership and Construction to Market Entry:(4) Local Partnership and Investment Approval: Establish partnership with local firms to navigate local market Land Acquisition and Financing: Need Foreign investment Committee approval and arrange financing Project Execution: Construction activities comply with regulations(focus on sustainability) Market Entry and Sales Launch: Strategic marketing plan for consumer base Notes: (qns) WHen shud homebuyer secure mortgage approval: before receiving OTP Foreigners purchase freehold properties in Malaysia: yes subject to state approval and minimum price requirements Tax applicable when purchasing property in malaysia: Stamp Duty Option to purchase(OTP) in context buying property in SG: legal document offers exclusive rights buy property Foreign investor acquire to invest in property malaysia: Approval from State Govt Missing: (reasons invest malaysia real estate), foreign ownership friendly, strategic location, my second home program for long term investment, no inheritance tax, financing options up 70%, population/amenities/disasters. (Challenges), property maintenance(managing abroad leads logistic challenges), tax implications(real estate gains tax for foreigners), stricter loans foreigners. (Cities), iskandar(near Johor and SG), Klang Vallye(high end), penang(heritage). Land ownership and title, Tarrens system(land registration title): freehold, leasehold, landed, strata. (Restirctions), obtain state approval purchase property, residential property RM1 million for popular areas, prohibit buy property special interest. Down payments percentage for foreigners high up to 30%. (taxes and fees), Stamp duty/legal/agent/insurance/maintenance. (buying process in Malaysia), Property selection and offer, due diligence, offer and booking, signing agreement(SPA), state authority approval, financing, payment stamp duty and fees, final payment and transfer title, property registration. (setting up foreign company in Malaysia), Company registration with SSM, name approval, incorporation documents, payment fees). (regulatory approval for real estate development), local entity setup, licenses and permits, foreign investment compliance, regulatory approvals. (partnership and construction to market entry), local partnership and investment approval, land acquisition and financing, project execution, market entry and sales launch Investing in overseas real estate(Part 2):(Australia) Ways buy properties in Australia: 1) Private treaty sale Common way Seller either accept or reject offers 2) Auction Highest bidder wins the auction 3) Off-the-plan purchase Common for new residential development\ Risks such as construction delays/changes in market conditions but can so offer potential incentives/savings General steps buy property in Australia:(11) Research market: Property price, trends, potential for growth Determine your budget: For mortgage, need obtain pre-approval for loan and this give idea of borrowing capacity Engage real estate agent: Guide buying process, experienced Inspect properties: Attend viewings, assess conditions/location/rental income Make offer or bid auction: Make offer that is subject to obtaining finance Engage conveyancer or solicitor: Handle legal aspects transactions Sign contract and pay deposit: Pay required deposit Obtain mortgage approval(if required): Finalise loan application; give documentation of identification/income Property inspections: Property inspections; building pest to ensure good condition Settlement: Payment remaining balance at settlement Post-settlement task: Register property transfer, property management if plan to rent out, insurance Foreign ownership restrictions:(3) Under construction or new buildings: Prohibited from buying property on resale market but can buy new buildings/under construction Vacant land: Foreigners allowed buy vacant land Established dwellings to be demolished or replaced with greater number of dwellings: Foreigners not allowed buy established dwellings UNLESS knock down and build larger homes/live in Australia on temporary basis but once leave need sell Key diff for locals VS foreigners: Locals no need apply thru FIRB and pay application fee Encourage foreign buyers to invest in new properties Tighter lending criteria for non-residents(larger deposits) Foreign Citizen Stamp Duty Property buying in Australia as a foreigner: Step 1: Assemble professional associates Conveyancer: Assist legal process for buying international properties, valid license Mortgage provider: Accountant: Not require accountant BUT can help maintain investment Buyer’s Agent: Give important info regarding property growth potential Step 2: Seek pre-approval for any loans Efficiency in transactions(no delay) Housing Market Australia strong thus short shelf life Purchase solid investment Step 3: Pre-approval from Australian govt FIRB Foreign Investment review Board(FIRB) Avoid delays when purchasing property Step 4: Begin searching for property Search ideal property(thru listing properties) Step 5: enter negotiations regarding purchase price Finalise info, paperwork and contract signing Step 6: Finalise Formal Loan Approval Finalise loan using pre-approved mortgage Step 7: Complete contract exchange and pay deposit Deposit required, subject to FIRB approval Step 8: Finalise necessary arrangement Seek legal advice, FIRb need copy contract for approval Step 9: Settlement Property title held by lending institution Property purchasing cost and ongoing expense:(10) Stamp duty: Depending on state, for foreign buyers subject to additional stamp duty surcharges FIRB application fee: Obtain approval from FIRB, application fee payable Legal and conveyancing fee: Handle legal aspects property transactions Property inspection fees: Building and pest inspection Mortgage application fees: When purchasing property with mortgage, need pay application fees Mortgage registration and transfer fees: Pay fees to elevant state Lenders mortgage insurance: Protect lender against risk default Property valuation fees: To assess property worth Utilities and insurance: Electricity, gas, water, insurance to protect investment Ongoing expenses: Council rates, body corporate fees(for strata properties), maintenance costs Property management: Manage property urself or thru agent Manage disputes arise, financial records, inspections, repairs Similarities and Differences(Singapore VS Australia): LOOK AT PAPER Missing: (ways buy property in Australia), private treaty sale, auction, off plan purchase. (general steps buy property), research market, budget, engage REA, property search, make offer, engage conveyancer, pay deposit, mortgage approval, property inspection, settlement, post settlement.(foreign ownership restrictions), under construction or new buildings, vacant land, established dwellings). (key diff locals and foreigners), locals no need apply FIRB and pay application fee, encourage foreigners invest in new properties, foreigners pay larger deposit, foreign citizen stamp duty. (buying process Australia as foreigner), assemble professionals associate, seek pre approval for loans and Australian govt FIRB, begin searching property, enter negotiations regarding property prices, finalise loan approval and necessary arrangement and pay deposit, settlement. (ongoing expense), stamp duty, application fee, conveyancing process, property inspection fee, stamp duty, mortgage and insurance fee Week 6: Considerations for property investment overseas Considerations for property investment overseas: Legal Ownership structures Corporate Finance Taxation Legal considerations: (Individual): Potential legal concerns, compliances/paperwork/permit need submit to, rental classification, if title of land protect foreign, safety of land title Legal considerations: (Incorporations)(6) Diff rights/responsibilities E.g.: Sole Proprietorship Partnership Limited Liability Company(LLC)/Private Limited Company Limited Liability Partnership(LLP) Public listed company Nominee Structure Legal considerations: (Incorporation) Sole Proprietorship: Pay personal income tax, simplest biz cuz self contractors/small biz owners, responsible for debts and liabilities so personal assets can be at risk Partnership: Two or more individuals, equal responsibility, limited liability(not involved day-to-day operations) Limited Liability Company(LLC)/Private Limited Company: Limited liability protection to shareholder, Shareholders not liable for company debts(oni investment) Limited Liability Partnership(LLP): Direct role in biz operations, professional in service industries like law/accounting/consulting, limit liability for actions of partners, not personally liable for biz debts, pay personal income tax, participate day-to-day operations without losing limited liability protection Nominee Structures: Hold legal title to assets on behalf of beneficial owner and maintain its privacy, nominee owes fiduciary duty to beneficial owner, however additional costs and risks cuz associated with tax evasion/illegal activities Note: Private limited structure is best/most convenient structure Case Study: BOI COmpany in Thailand Invest in open biz in Thailand while having benefits along the way Promotion Advantage: Tax benefits: exemptions/reductions corporate tax Exemptions production exports Exemptions import duties for RND biz Non-tax benefits:  100% foreign ownership Visas and work permits Land ownership Land ownership: Cant own land as foreigner but company can own land in Thailand if have BOI promotion Eligibility of promotion: Perform eligible activities New/existing company Right debt-to-equity ratio Minimum capital investment Balance Debt-to-Equity Ratio: (calculation) Show financial leverage company have, debts cannot 3 times higher than capital(3:1 ratio) otherwise increase equity and decrease debts Promotion Disadvantages: Complicated set-up: (Long duration, higher cost) > 3 months to apply BOI promotion, lawyer firms charge more to apply for BOI promotion compared to standard company registration in Thailand Accounting: Accountant define and separate income and expenses between part of company thats promoted by BOI and those that are not Accountant ans long list accounting/tax qns clearly/accurate/detail Pay for more accounting services compared to running a non-BOI company Inspections: Hire lawyer in Thailand to prove company meant no wrongdoing Prevention: Know details BOI promotion Biz operating 100% legally Accountant experienced with BOI promoted companies Common types companies for BOI promotion Private Limited Company Public Limited Company(PLC) Joint Venture: 2 or more parties pool resources/expertise for biz purpose, involve both thai and foreign partners Branch office: Directly managed by foreign parent company Ownership structure of properties: Two types:  Buying under personal name or multiple ppl(most appropriate for small no. ppl/same nationality for simplicity) Buying under corporate entity(company name) Considerations: Types of property: Residential property 1. Landed Properties 2. Strata titled properties Commercial property(both strata and landed) 1. Retail 2. Offices 3. Industrial buildings 4. Other commercial buildings and classification Countries not allow purchase of land by foreigners: Singapore: Cannot own land, If PR, seek Land Dealings Approval Unit before buying landed house and cannot rent it out Thailand/Vietnam/Indonesia: Not allow foreigner to own land Countries not allow purchase of Apartments And Condominiums by foreigners: Thailand: Oni buy strata-titled properties and project at least 51% owned by Thai ppl Vietnam: Buy apartment/condominiums with max 50-year-lease, cannot buy land Indonesia: Buy freehold apartment/condominiums but not own land, oni lease Set up company to invest in building/property/project/commercial buildings etc: Buy indonesian property via indonesian person(nominee), attorney gives rights to mortgage/sell/lease property, permanent rights of use agreement, loan agreement between company and nominee Risks: Large amt land sold to foreigners via nominee structure Foreign direct investment structure:(FDI) Meet approved categories of investment and have comprehensive biz plan before seen as FDI and enjoy benefits(e.g. Board of Investment(BOI) company, Penanaman Modal Asing Company) Land ownership: Freehold ownership in the case of Indonesia, own land in Thailand to BOI judgement Legal Protection: Higher degree recognition and protection incentive/subsidies/support Companies that meet these criteria will enjoy these benefits Qns to ask: What is the ownership structure? What is the capital structure? What are the legal pitfalls? What are the costs and time involved for doing so? Corporate Finance: Maximise company’s value by making good decisions abt investment/financing/dividends, allocate scarce resources to minimise expenses and maximise revenue(stocks/bonds) Investment where commit sum of money in exchanged for: Cash flow Future lump sum Both Corporate finance for better control over: Returns Cash flow Valuation of entity Types funds: Fund internally 1. Issuing new shares within company 2. Existing shareholders subscribe to these shares 3. Company borrow from shareholders thru debt issues Fund externally 1. Issues shares/bonds to public to fund expansion 2. Stricter rules pertaining to solicitation of funds Financing the investment: Cash Loan Combination Calculating investment returns: Time value of money, outgoing and ingoing of cash Taxation: Impact returns significantly, find net returns(e.g. Value-Added Tax & Service Tax) Taxation and Accounting: Foreigner Tax:(corporate entity owned by foreigners) Impose tax on foreign corporate entities Stamp duties and levies or admin fees: Stamp duties and additional stamp duties on corporate entities Withholding tax: Tax govt impose from revenue Capital gains tax: Capitals gains from buying and selling assets Property tax: Annual Value(AV)where its gross annual rent of property Taxation: Inheritance tax Road tax Stamp duties Admin fees Income tax Corporate tax(income subjected to taxation in country where property located, double taxation to prevent same income being taxed twice) Missing: (Considerations for property investment overseas), legal, ownership structures, corporate finance, taxation. (legal consideration individual), safety land title/paperwork, legal concerns, (legal consideration incorporations), sole proprietorship, partnership, private limited company, limited liability partnership, public listed company, nominee structure. Redoing// Sole: responsible for debts and risk of personal assets Partnership: equal, limited liability Private limited company: limited liability protection shareholder where not liable company debts Limited liability partnerships: not liable biz debts, day to day operations Nominee structure: legal titles on behalf beneficial owner and maintain privacy. But add costs and associated illegal activities BOI company Thailand where invest in open biz in Thailand and gain benefits: Tax benefit: exemptions from corporate tax, production exports, import duties Non tax benefits: 100% foreign ownership, visas and work permits, land ownership Eligibility promotion: perform eligible activities, existing companies, right debt to equity ratio(3:1), minimum capital investment Disadvantages: complicated set up(long duration, higher cost), Accounting: separate income, accurate details, run non boi company Inspections to prove no wrongdoing Ownership structure properties(2 types): Buyer under personal name/corporate entity Countries not allow purchase land by foreigners: SG(unless PR but need approval), Thailand/vietnam/Indonesia(same for purchase apartment/condos where oni can lase/strata titled property) Set up company to invest in buildings: nominee structure, attorney gives rights lease property, loan agreement between company and nominee Corporate finance want maximise profit. Invest for cash flow and future lump sum. Better control of returns, cash flow and validation entity. Type funds: Internal and external(shares/rules) Taxation and accounting: stamp duties, property tax, inheritance tax, income tax, corporate tax Week 7: Considerations for property investment overseas(part 2) Maintenance: maintain facilities, hire maintenance company Asset class definition: Assets structured via URA master plan E.g. Australia: Residential(houses, villas) Commercial(offices spaces, leisure facilities) Rural(not exist in many countries, agricultural properties) US: Residential: condos, single family homes) Commercial:(Office buildings, hotels) Industrial:(warehouses, manufacturing facilities) Land:(vacant land, working farms) Land zoning: Plot ratio for limiting development intensity on a site. E.g. environmental zoning, green belts, forest zone Repatriation of Money(Remittance): Repatriate money back into local currency when dispose asset. Bank transfer but charge higher fees. Limitation is amt of currency can repatriate therefore assess risk investment environment. If cannot repatriate what can u do? Foreign exchange rate: Consider base currency vs country want invest in. ratio 3:1, earn money cuz property appreciated but currency now 1:4 therefore lose money Human resources:invest foreign company, bigger operation, hire local staffs and movement staff across borders) Local staff: local labour laws/unions, ease hiring and firing Expatriate staff: religion, living conditions, tax implications Language, cultural and religion: Staffing availability more difficult(Skill vs language). Additional costs in translation and operating when english not common language. Different ways of doing things where cultural and religious sensitivities not observed. Country demographics: Income and spending power determined by demographics distribution, younger country need housing while ageing population need old folks home(e.g. Consider when building resort in country where demographic older) Country connectivity: Not strictly to physical connectivity. (airport, land transport, digital, trade agreements) ICT(digital connectivity) important cuz faster flow info in knwoledge economy lead increase productivity. Liquidity and transaction volume: Size of market. If deep enuf. Robust and liquid market attractive for investors cuz can always buy and sell. Availability of statistics and analytical data: SG is developed and small country but high population density thsu easy perform. SingStats(SG statistics), URA/SLA/HDB(property data). In other markets, may not be readily and publicly available and no central data bases. Property agents have internal research team on country reports. Consider searching local language. Wheres start research: Use research framework Collect and analyse secondary data(dont take secondary data as gospel) Conduct primary research(study actual site, map, bring land surveyor) Things to bring to site(high resolution camera, high quality drone for aerial pictures, GPS, note down important landmarks)