Property Investment: Should You Diversify into Foreign Markets?

Investing in property is an established wealth building strategy; property investment typically behaves differently to other investments such as stocks or bonds and is regarded as being a valid hedge against inflation and being more resilient to economic fluctuation.

Tax benefits and incentives for foreign investors can offer increased potential to maximise return and choosing to invest in desirable locations, with an appeal to travellers and hybrid workers increases this potential.

Investment in a dual season alpine resort offers significant potential for a regular rental income from tourists, as well as digital nomads, seeking a base for several months at a time. Combine this income potential with benefits of having your own mountain retreat and the decision to diversify becomes almost irresistible. 

This article will look at the main types of investor that could benefit from diversifying into foreign markets including existing portfolio owners, single property owners, and homeowners

Property Investment: Should You Diversify into Foreign Markets?

Diversification with Foreign Property for existing portfolio owners

There are several benefits to diversification with foreign property for existing property owners. 

Geographic diversification

Investment in foreign property means reduction of risk exposure and fluctuations in your home market as well as an increased opportunity to capitalise on diverse market conditions. 

Currency diversification

Holding assets in a different currency can offer some protection against currency risk and if your domestic currency depreciates the value of your foreign property may increase, thus increasing your wealth. 

Access to different types of market

Choosing to invest overseas may offer opportunities not available in your home country, such as ski properties. This increases the potential for rental income. 

Improved lifestyle

Choosing to invest in foreign markets opens up the potential for opting into a co-primary lifestyle or simply the pleasure of having a holiday home, alongside the benefit of a rental income. 

Property Investment: Should You Diversify into Foreign Markets?

Foreign property market success stories

Stand out examples of markets where property investors have struck big in recent years are varied in terms of location. Examples include Singapore, which saw investors in prime city real estate accrue 50% return in the years between 2010 and 2020.

Another is Berlin, where the twin factors of population increase and high rental demand led to a huge 140% increase in property prices between 2007 and 2020 are obvious examples of successful foreign investment. The UAE saw a sales growth of a staggering 76% from 2021 - 2022.

This type of investment decision isn’t always about pure figures. For those seeking benefits such as an improved lifestyle alongside positive appreciation, many alpine resorts offer significant potential.

The Knight Frank report notes the French and Swiss Alps as having robust investment markets - resorts such as Crans Montana and St Moritz show an increase of 14% in the twelve months to June 2022. The report also notes that in 2022 the price of a ski home increased at its fastest rate since 2014.

It’s likely the twin impact of the pandemic, as well as increased understanding of the benefits of flexible working continue to drive the desire to enjoy the benefits of a mountain lifestyle.

Combine this with the pleasure of living amongst some of the most beautiful scenery in the world, and the benefits of investing in the mountains rise to a completely new level. 

Adding a Global Dimension to Single Property Investment

For those with a single domestic property investment, choosing to invest overseas can add a new dimension to a portfolio.

Just like investors with larger portfolios, Single property investors will benefit from currency diversification and protection against fluctuation of domestic investments, as well as the hedge against inflation.

Lifestyle benefits are also a big draw, with the potential for living in your investment for part of the year or using it as an occasional retreat. Rental income can be lucrative, and many overseas homes offer tax incentives for investors who can commit to letting out their home for part of the year. 

Risk management for single property investment

A single property investment means the full benefits of diversification are naturally reduced. For this reason, risk management is even more essential for the single property investor.

It’s essential to understand the local market and fluctuations, especially if you’re hoping for a sound rental income.

Being aware of local investment in infrastructure, potential for growth and popularity with visitors will help you make a wise decision. Alongside initial costs of the investment, it's important to consider aspects such as maintenance, management fees, taxes and insurance. Investors need to understand the ups and downs of the tourist market and plan for times when rental income is less abundant. 

Homeowners: Unleashing your potential as property investors

Homeowners as investors is an indirect concept, but the potential for investment in foreign properties is still open to those whose only property is their current home. If you have substantial equity in your current home, then there is potential to re-mortgage or use an equity loan to allow you to invest overseas. 

This could bring benefits such as a rental income that would cover the cost of refinancing, alongside lifestyle benefits and potential for appreciation in value that could prove a lucrative long term investment.

Alternatively, your home could offer improved cash flow - if you hope to make a more permanent move overseas, or live overseas for part of the year, your home could provide a rental income that would make this possible by covering aspects such as increased maintenance costs, insurance outlay and management fees. 

Whilst this is a less direct route into foreign property investment, benefits detailed above such as geographical diversification, currency advantage and potential for higher returns in lucrative locations are just as valid for homeowners as they are for other investors. 

Property Investment: Should You Diversify into Foreign Markets?

Practical Steps to Get Started in Foreign Property Investment

Coming soon - practical steps to get started in the foreign property market

If you’re keen to explore the potential offered by diversifying into foreign property markets, SnowOnly can help. We’re a global property portal and we’re experts in ski property. Using our site you can view thousands or properties without the pain of trawling dozens of different sites.

We offer expert insight into the foreign property market, with buyers guides, articles and specialist guides to all kinds of ski property. 

Our next article will detail the practical steps you need to take to get started in the foreign property market, with thoughts on choosing the right property, the value of local knowledge and tips on identifying markets and properties. You can join our mailing list, or just keep an eye on our social media to catch the link.