An Intro to Overseas Property Investment for Retirement

Getting older is an unavoidable fact of life, but we are collectively ageing at a rate unprecedented in history and living longer than ever before. The fastest ageing populations in the world are living in Japan, South Korea, Spain and Greece, with the US, UK, Canada and Australia not far behind. China is facing a demographic imbalance that could potentially throw it into chaos.

Despite the impression that Millennials currently rule the world, the only young populations – meaning net economic contributors – are in Africa, the Middle East and Southeast Asia. The long and short of it is that retirement living is on the rise, and so is investment in the sub-sector as millions of people get ready to kick back and enjoy their golden years.

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To Rent or Buy?

Perhaps not surprisingly, Hong Kong has a shortage of retirement communities or retiree-targeted developments. The tradition of familial duty towards the elderly keeps demand low, and unscientific surveys of Hongkongers – local and expatriate – suggest most are looking overseas for their retirement years.

Some may consider heading “home” if the weather’s right, others will flirt with tertiary locations such as the low-cost Philippines and Bangkok, where a strong Hong Kong dollar (for now at least) can ensure a high standard of living.

As with any investment there are pros and cons in investing with an eye towards the mature set. Retirees are getting younger and younger, and so the amenities and perks required for so-called retirement living vary wildly. But there are a few basics that cut across all locations; basics that appeal to potential renters in the short-term and permanent residents down the road.

While many of us are purchasing homes specifically to live in at a future time, financial viability is a concern for every year of life, including in retirement.

Golden agers do indeed rent, hence, the investment opportunity. More and more Baby Boomers are liquidating their assets (like the family home) and downsizing to apartments that handle things such as maintenance and repairs, which are typically the responsibility of owners.

As long as rental fees do not exceed 25% (some estimates suggest as little as 15%) of a retiree’s income, renting provides the kind of flexibility that can be a boon to older people.

Boxes to Tick

Naturally, when it comes to settling down when it isn’t attached to raising children (which demands good schools) or working, a home for the long term has its own specific checklist to complete.

At the top of that list is climate. Retirement can mean never having to deal with icy rain and shovelling snow ever again. As a result, spots such as the southern United States – from California to Florida – Australia, Thailand and Malaysia are prime destinations.

Cold, wet weather can be miserable for young people, and as medical issues become more regular with retirement, warm, dry and sunny climates start to look more appealing. Warm is familiar to Hongkongers, but the raining season loses its charm when doctor’s visits become more frequent.

Another factor to consider is how well appointed a retirement community is, if that is indeed something to consider.

Plenty of retirees are happy to live independently, but an all-inclusive community (really not much different from an exclusive luxury enclave) with strong healthcare and leisure amenities can make for a smart investment, either to keep for the long term or to hold for a few years and sell to buyers exiting the workforce.

But they are not a standard investment property. Retirement communities live and die by their lifestyle environment, and carefully planned fee structures (maintenance and management) in new developments that avoid hidden costs.

As a niche market with limited supply, retirement community investment can be complicated, as well as loaded with loopholes to look out for.

Of course there’s the potential for resale as well. Sadly, a home may only be occupied for a few years on occasion, but with just a couple living in it, the lack of wear and tear keeps resale value relatively high. If a retirement community home is a long-term investment (one that can be bequeathed to the next generation), that’s an important factor to bear in mind.

Where to Go

So you’re looking for a place to enjoy a hard-earned retirement, or you’re looking to finance it right now by renting to like-minded seniors – the final question becomes one of where to do all this.

Though laws and policies change, currencies fluctuate and none of us knows what impact continuing climate change will have on a potential home, there are still some locations that stand head and shoulders above others, or whose stars are rising.

First among equals, particularly among Asian buyers, are Malaysia and Thailand.

Long-time favourites for their welcoming weather, bustling urban life (if so desired), familiar culture and close proximity to family, both countries are perpetually popular retirement locations. High standards at a relatively low cost of living help, and both are welcoming of overseas buyers.

Malaysia’s “Malaysia My Second Home” programme (guaranteeing residency) has helped boost sales there by investors looking at the long term.

In Europe, despite recent Euro zone currency crises and economies in shambles, Greece, Portugal and Spain are making strong retirement cases. Like Malaysia, these countries offer various types of Golden Visas that provide easy movement within the EU and/or Schengen states. The weather in all three can’t be beaten and the laid-back lifestyle is second to none. On the downside, it’s Europe, where a high standard of living can be expensive.

Finally, wild cards on the retirement scene these days include Panama and Malta. Panama is in the midst of an economic boom on the back of the expanded capacity of the Panama Canal. Perhaps most notable are its liberal taxation laws, which demand income tax for money earned in Panama, only easing the tax burden considerably.

Up-and-coming Malta offers a Mediterranean lifestyle equal to that of Italy or Greece, varied visa options and one of Europe’s most affordable locations. To its disadvantage, Malta is tiny and could quickly reach its capacity. And of course, if any of these are just too warm, there’s always Canada.