Hong Kong’s real estate investors head offshore to increase their returns, as local yields drop and are now among the lowest of all global major cities. They typically choose English-speaking countries with a high quality of life, excellent education systems and promising real estate economics. Ireland offers these features and therefore attracts significant investments from foreign investors, which now fund the majority of the country’s property development. Learn about the unique benefits and key considerations when investing in Irish real estate.
An Opportunity for Yield Arbitrage
Hong Kong’s real estate yields have declined further during the pandemic. According to Savills, a leading real estate service provider, yields in Hong Kong were at only 1.9% in 2020. The city’s real estate market is the world’s least affordable for the last eleven years, making large rent increases unlikely. Europe’s major cities offer overall higher yields, many over 3%. Returns of Dublin’s prime residential property stood at 3.6%.
This has important implications for Hongkongers considering a property investment abroad. At the average yields stated above, it takes over 52 years to amortize a residential property in Hong Kong. An investment in Irish property, in contrast, breaks even after less than 28 years.
Investing in Europe’s Fastest Growing Economy
Real estate markets depend strongly on a country’s population growth and overall economic health. International property investors therefore seek to understand the long-term macro developments before deploying capital. Ireland’s set up is unique in this regard, with four main drivers attracting investors from abroad: high population growth, a highly-developed and fast growing economy, the country’s role as Europe’s technology hub and a significant shortage of housing.
Investors in Ireland can therefore expect to see continued strong income levels and a considerable property demand, it is expected that the housing supply issue will take several years to resolve. The Irish government is determined to address this gap through a number oof measures including via its long-term leasing scheme. Local authorities are seeking to lease 10,000 properties from private investors offering 10-, 20- and 25-year under this programme
Three Investment Vehicles to Participate in Ireland’s Growth
Foreign investors can choose between three approaches for investments in Irish real estate. First, they can invest in a property directly and own it outright. This is especially relevant if the investor and his family want to reside in Ireland. Second, capital can be invested into a fund which builds, buys or renovates properties. Third, investors can select one or several Real Estate Investment Trusts(REITs) to allocate capital to through stock market exchanges. All three approaches come with specific advantages and disadvantages, as shown in the following table. Choosing the right option depends on an investor’s objectives. A professional advisor can help to identify the right option.
Option for Residency
Purchasing Irish property offers further benefits for individuals that seek residency abroad. The country provides an attractive environment to study, work and live and Investors can obtain Irish residency if they deploy €2 million into Irish REITs or €1 million into certain qualifying investment vehicles through the Enterprise Investment option. The corresponding Immigration Investor Programme (IIP) has attracted over 1.100 high net-worth individuals over the last 9 years.
The Bottom Line
Hong Kong citizens can increase the returns of their real estate portfolio by re-allocating capital to European property. Ireland offers the highest yields of any European, English-speaking country and can provide further benefits for individuals seeking residency abroad.
About Unlock Ireland
Unlock Ireland is an independent advisory firm promoting and enabling foreign investment into Ireland. We offer different investment options including investment funds, real estate, renewable energy, REITs and direct investment into Irish enterprises. Our in-house investment team has over 30 years of experience in financial services, construction, real estate and cross-border investing. Unlock Ireland also provides comprehensive immigration advisory services for investors who choose to obtain Irish residency via the Immigration Investor Programme (IIP) and is the only firm providing access to all four investment options under the IIP.