With Fed rate-easing cycle under way, which real estate markets offer value for money?
6 Mins Read
Now that the US Federal Reserve has embarked on a policy easing cycle, with some other central banks around the world following suit, property investors must treat these changes as temporary and remember that there is no substitute for proper research into specific markets and assets, according to consultants.
The Fed cut its target rate by 25 basis points to a range of 4 to 4.25 per cent during the sixth meeting of the Federal Open Market Committee last week. The Fed’s easing was widely expected and is seen as the start of an easing cycle that is likely to extend into next year.
Given the outsize influence of US monetary policy on the global economy and with the US dollar remaining the main currency for worldwide trade, the Fed’s decision is likely to trigger similar easing steps for other central banks. Add in the complexities of regulation, taxation and borrowing across borders, and investors considering property assets across the globe must plan carefully, according to Liam Bailey, global head of research at Knight Frank.
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“Investors need to think very clearly about their objectives,” he said. “What are they seeking to achieve? Is the investment about securing an income stream, or capital growth or about a defensive strategy – to put money into what they perceive as a safe-haven market?”
Across all markets, investors must engage in deep research, considering currency impacts, entry and exit taxes, financing, running costs and liquidity, he said. “Treat policy as a live variable rather than a constant,” he added.
For investors based in Hong Kong, where the local currency is pegged to the US dollar, it was imperative to be savvy and watchful for any sudden shift in US monetary policy, advisers said.
For investors looking at opportunities abroad, the challenge was more significant.
“Things to watch out for include currency risk, as exchange-rate shifts can make your monthly payments more expensive, and the complexities of foreign laws and taxes, which can be very different from Hong Kong,” said Kashif Ansari, co-founder and group CEO of Juwai IQI, a global real estate network with more than 50,000 agents and more than 50 offices across more than 30 countries.
Investors with ample cash, such as many mainland Chinese investors, can avoid the complexities of international borrowing and have an advantage in bidding for properties, Ansari said.
“Being all-cash also makes you more attractive to vendors, which can give you a significant advantage in negotiating your purchase,” he said.
As for investment destination, both Bailey and Ansari said that each market presented its own opportunities and challenges.
In the US – where foreign investment in real estate for the 12 months ended March increased 33 per cent to US$56 billion from a year earlier, with Chinese nationals as the top foreign group – the property market was “underpinned by deep, liquid gateway cities and a robust legal system”, Bailey said.
The main frictions were regulatory and tax-related, such as “a patchwork of state rules and tighter anti-money-laundering reporting for all-cash deals”, Bailey said, adding that clear structuring and compliance planning were necessary from day one.
The UK, particularly London, was deemed a global safe haven with highly transparent conveyancing and strong resale liquidity, although returns could be dented by the non-resident stamp-duty land tax, a surcharge layered on top of already complex stamp-duty bands, Bailey said. The Bank of England did not cut rates in September after a rate cut in August, and what the monetary policy committee would decide at its next meeting in November remained unclear.
Canada’s prime assets in Toronto, Vancouver and Montreal benefitted from a high quality of life and strong rental markets, but an extended federal restriction on most foreign residential purchases was the defining constraint for international buyers, Bailey said. Canada cut its key policy rate by a quarter point to 2.5 per cent on September 17.
In Australia, official data released on Wednesday showed that the country’s consumer price index rose 3 per cent year on year in August, the highest increase in a year and surpassing market expectations of 2.9 per cent. The stronger-than-expected inflation throws a curveball at the Reserve Bank of Australia’s plans for a rate cut this November.
Bailey said Australia’s strength came from transparency, city-led resilience and population growth supporting core demand in Sydney, Melbourne and Brisbane. But non-resident buyers typically required approval and faced material fees and state-level surcharges, he added.
Meanwhile, Japan was attractive at the moment because of the weak yen and high yields for residential rentals in major cities, said Juwai IQI’s Ansari. However, investors needed to move quickly because some locals were calling for a foreign buyer ban, similar to Korea’s recently announced partial ban.
Malaysia was seeing a foreign buyer boom, as people drawn by educational and business opportunities, as well as lifestyle, sought homes for holidays, retirement or investment, according to Ansari. Buyers should look for properties in areas with strong demand and limited supply, he added.
A crane is seen amongst residential properties in Sydney, Australia, March 12, 2025. Photo: Reuters alt=A crane is seen amongst residential properties in Sydney, Australia, March 12, 2025. Photo: Reuters>
Southeast Asia’s top business hub Singapore provided legal certainty, very tight land supply and a safe-haven currency, all of which supported capital values in the prime segment, Ansari said. The main constraint was taxation, given the elevated additional buyer’s stamp duty for foreign buyers.
The UAE, particularly Dubai, had displayed strong growth and high demand, Ansari said. “It is an easy market for offshore investors to navigate and an attractive one for those seeking lifestyle and access to global commerce,” he said. Dubai is poised for a record streak of 57 months of rising home prices if a forecast for October holds true, according to data provider Reidin.
