08111529 champalimaud design 79 peak Arcadia



Purchases of vacation homes are seeing a new high—experts share the lowdown on what you need to know, before embarking on such an investment

08111530 luxurious apartment with premium views c engel volkers dubai mmc Arcadia
COVER A home in Dubai, marketed by Engel & Völkers. Image: Engel & Völkers

In 1623, Louis XIII, the King of France took a fancy to a small commune in the western suburbs of Paris called Versailles and built a hunting lodge there. His successor, Louis XIV, turned it from the chateau it had subsequently become into the Palace of Versailles, now one of the country’s most popular tourist attractions. The famed castle is also believed to be the earliest example of a holiday home. The idea of a recreational residence has seen many iterations since then, spurring not only the demand for vacation retreats but also the notion of an abode its owner could rent out to visitors and digital nomads. Furthermore, as borders open up, the thirst for “revenge travel” has come to the forefront. The jet-set are eagerly returning to their old ways, making up for the years spent being primarily home-bound; this has, in turn, sparked a demand for pieds-à-terre abroad they can now visit with ease.

08111531 mark stoop as wag 6bpg Arcadia
ABOVE Photography: Mark Stoop / Unsplash

According to Sotheby’s International Realty’s 2023 Luxury Outlook report, the luxury second-home market saw a boom even during the pandemic years. Tammy Fahmi, senior vice-president of global servicing and strategy at Sotheby’s International Realty reveals that the toss-up has since been between lifestyle versus financial considerations.

Victoria Garrett, Asia-Pacific head of residential at Knight Frank agrees. “Purchasing a second home used to be largely viewed as a financial investment. But that perception is evolving to amalgamate financial investment with your version of paradise,” she explains. Bjorn Fjelddahl, partner at Odin Property attributes the frenzy for vacation homes to a new-found awareness of our surroundings; most of the Nordic boutique firm’s developments are in Hokkaido, Japan. ”Some might call it an urgency: of the importance of nature, the environment, clean air and the yearning for quality time with loved ones,” he adds.

Natural Instinct

Following the decision to purchase a second home is often the conundrum of whether buyers should look for an abode in the city or opt for one that’s ensconced in nature. It is ultimately a matter of personal choice, says Fahmi. “For some, being within walking distance of top restaurants and shopping makes choosing a city easy, while resorts are popular among retirees and those with families given the variety of amenities and activities they offer,” she says. Regardless of the objective behind the purchase, “anyone considering this must accurately evaluate their own financial situation, risk tolerance and investment goals”, says Dominic Volek, group head of private clients at Henley & Partners.
Volek recommends reviewing the property’s history for any past issues or disputes that could affect its value. “Hire a reputable real estate agent who is knowledgeable and experienced in the local market. Research the area thoroughly and consider factors such as the local economy, climate, crime rate, proximity to attractions and amenities.” Fahmi considers this the first port of call as well, considering how such purchases are often made in a destination one might not be entirely familiar with. “It’s also important to seek out or get recommendations from your real estate advisor on local accountants and lawyers who can help you to navigate any tax implications and plans for your property,” she adds.
08111531 the coast at sentosa cove sotheby Arcadia
ABOVE Marketed by Sotheby’s International Realty, The Coast at Singapore’s Sentosa Cove is a 249-unit sea-facing condominium with scenic views of the southern waters. Image: Sotheby’s International Realty

Location Matters

Follow the trends, speak to industry insiders, and consult friends and family who have gone down the same path. But the key prerequisite for a principal property still applies: location matters. Clarice Lau, head of sales for residential international project marketing at Knight Frank Singapore says that Singapore’s safe-haven status continues to make it a popular choice among ultra-high-net-worth individuals (UHNWI) in Asia. “It is their top choice in the Asia-Pacific (APAC) region, and the fourth choice globally when looking for their next home purchase.”
However, Lewis Cha, executive director of List Sotheby’s International Realty Singapore paints a different picture based on the Global Property Guide (GPG) ratings, which lists Malaysia as the best country in Asia to invest in, followed by Indonesia, the Philippines and Vietnam. This could be attributed to the fact that there are very few restrictions on foreigners owning a freehold property in Malaysia, adds Chris Liem, owner and principal of Engel & Völkers in Hong Kong. Volek concurs on the significance of the Vietnam market. “In Vietnam, the vacation-home market is still relatively new but growing quickly, with Da Nang, Nha Trang and Phu Quoc featuring prominently on the radar of second-home buyers.”
In comparison, foreign tax can go up as high as 60 per cent for non-resident property buyers in Singapore. In the city-state, a price-curbing measure known as the Additional Buyer’s Stamp Duty (ABSD) was implemented in December 2021 to discourage multiple purchases of property, especially by foreigners. In April 2023, the ABSD rate notably doubled from 30 per cent to 60 per cent for overseas buyers, who now have to pay taxes amounting to that percentage of the property’s value. Even with this eye-watering tax increase, some experts think that Singapore will remain appealing to UHNWIs. “Singapore is still a top choice given its pro-business environment, political stability, excellent healthcare and educational standards; some [buyers] will still be willing to pay higher taxes since the pros still outweigh the cons,” says Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.
08111530 luxurious designer apartment c engel volkers hong kong mid levels west Arcadia
ABOVE A home in Mid-Levels, Hong Kong, marketed by Engel & Völkers. Image: Engel & Völkers
Sun adds that recent condominium purchases within the $5 million price bracket remain unaffected by the new ABSD rates; these buyers are likely foreigners who have moved here with the objective of gaining citizenship and already have the necessary wealth and processes in place to achieve this goal. The majority of such buyers were from China, followed by those from India and Indonesia.
While Singapore’s property market has displayed resilience, Liem is of the opinion that Hong Kong should not be overlooked as an investment destination either. “With Hong Kong fast-forwarding its efforts to regain its status as a regional financial hub, it is attracting more UHNWI investors,” he adds. Engel & Völkers has been successfully marketing a few retreats on Lamma Island and other locations in Hong Kong.
According to Garrett, other areas in the APAC region that are popular for both vacation homes and properties with investment potential are waterfront abodes and branded residences in Australia as well as units close to Japanese ski resorts in Niseko, Hokkaido. She adds that in Thailand, the demand is for resort homes in Phuket and branded residences in Bangkok. The weakening Japanese yen is definitely a selling point, and the fact that Niseko has been increasingly positioning itself as an all-season destination has attracted many Singaporean investors.
Garrett predicts that with the shift to hybrid working and a rekindled love of the great outdoors, the demand for Japanese destinations that was evident during the 2021-2022 ski seasons will continue. “With Japan hosting the Ski Jumping World Cup 2023 [held in Sapporo recently in January], its popularity is bound to increase both locally and [among] overseas [buyers], particularly from Singapore, Hong Kong, China, Southeast Asia and Australia.”
Moving slightly further away from the region to western Asia, Mohab Samak, managing director at Engel & Völkers Market Centre in Dubai also recommends investing in a holiday house or apartment in Dubai due to its attractive climate, infrastructure and high quality of life. “The GCC (Gulf Cooperation Council) states, particularly Dubai, Qatar and recently, Saudi Arabia, are anticipated to have the highest investment potential in Asia,” he says.
Eventually, where you want to holiday with your family hinges on your personal feelings about a certain place, its vibe and, hopefully, the friendships you can develop, says Isabelle Miaja, founder of Miaja Design Group, an interior design company that has designed a plethora of luxury hotels, resorts and residences around the world. From these past experiences, Miaja suggests staying a few times in the area on vacation to get a feel of it before buying.

The Long Run

Having rental income might be another important consideration in the purchase of a vacation home, says Fjelddahl, “because if managed well, your running costs and more can be offset by rental income”. Cha concurs, urging further consideration of locations when straddling personal use and investment potential. “Beaches and mountains might lose their popularity when overtaken by other locations, or experience seasonal highs and lows. As tourists come and go, it is good to invest in a location with healthy demand from local tenants and expatriate professionals,” he adds.
The GPG lists Indonesia as the most attractive prospect with a rental yield of 5.75 per cent, followed by the Philippines with 5.45 per cent. Malaysia, India and Japan fall between 4.4 and 4.8 per cent, whereas Hong Kong and Taiwan show the lowest yield of 2.8 and 2.1 per cent respectively. Attractive as these figures are, it is important to also take note of the rental income tax that might accompany a property. In this scale, India imposes the lowest at 5.8 per cent, compared to the 20 to 30 per cent tax one would pay in most countries, says Cha, adding that Malaysia occupies the top end of that scale.

New Value

As Cha explains, investors usually buy property for two reasons: rental yields and capital appreciation. “These are the key factors of consideration as to whether they should hold [onto] or sell the property,” he says. Another key defining factor that adds to the resale value is the history, reputation and quality of the developer, adds Fjelddahl. For this reason, as part of the due diligence to exercise before buying, “the investor needs to check whether there are any barriers to foreign ownership, the taxes involved and, specifically, the ease of moving their funds out if they have to sell their property,” he says. Investors in Hong Kong and Singapore do not pay capital gains tax upon disposal of property, whereas Taiwan has the highest capital gains tax at 35 per cent, followed by India at 30 per cent and Indonesia at 20 per cent, says Cha.
As for price appreciation, Taiwan, Singapore and Japan saw home prices rise by more than 35 per cent in the past five years despite the pandemic. “Aside from the decline in home prices in Hong Kong and the Philippines, prices remained constant in India and Vietnam, while Malaysia and Indonesia saw a moderate price appreciation over the same period,” explains Cha.
08111649 champalimaud design 79 peak Arcadia
ABOVE Champalimaud Design realised an elegant interior transformation for one of eight exclusive villas in the 77/79 Peak Road luxury development in Hong Kong. Image: Champalimaud Design
However, when it comes to estimating the renovation cost of your second home, owners should still treat it like they would when purchasing a primary residence, says Winston Kong, partner at international design firm Champalimaud Design; the practice has crafted luxurious hotels and residences in Asia and beyond. Kong advises conducting a thorough inspection to suss out any structural, mechanical, electrical, plumbing or construction issues. He also recommends addressing design-related matters specifically in the kitchen and bathrooms; these include assessing the condition of the fixtures and appliances as well as ensuring their proper placement for optimal functionality. “It’s prudent to steer clear of properties that necessitate significant plumbing, mechanical, HVAC (heating, ventilation and air-conditioning) or structural repairs.\The extent of such repairs should be considered in relation to the potential value of the property versus the purchase price,” he says. If any renovations are needed, it is important to ascertain where the construction crew is going to come from—whether it is from the local village or the nearest city, says Miaja. “One knows how difficult it is to renovate in your own backyard, even more so in a foreign country. Check the local newspapers and browse the Internet before talking to a real estate agent to ensure you pay the right price and value for a home in that area.” In the case of a new build, she suggests working with a reputable local architect to ensure easier logistics management.

Tatler Asia

08111530 champalimaud design 79 peak Arcadia
ABOVE In this Hong Kong villa, Champalimaud Design crafted a sophisticated modern interior with subtle nods to its Asian context. Image: Champalimaud Design

Safe and Sound

Another important factor in the purchase of a vacation home is minimal upkeep. “It’s essential to consider the weather patterns of the city or town, such as hurricanes or heavy snowfall, and how they will affect the property’s maintenance,” adds Kong. Maintenance fees such as lawn care, pool upkeep and snow removal should be researched, along with the availability of housekeeping and caretaker services. The latter, Kong says, would prove especially vital if the plan is to allow family and friends to use the property.
Another aspect that is key is security. Being in a foreign country, one cannot rely on the same standards of comfort and security as at home. “It is important to ensure you are protected against theft and fire, and ensure that the security cameras are updated and working,” says Miaja.

Tatler Asia

08111529 champalimaud design 79 peak Arcadia
Make it yours

Last but not the least, refitting the home to suit your purpose is important. ”Ask yourself what the main intention of the vacation home is,” says Derek Lim, Asia general manager at luxury furnishings retailer Space Furniture. In that respect, a vacation home can be used to host family and friends under one roof. “For a holiday home used for hosting, it would be essential to curate an experiential living space that suits the purpose. An example would be selecting a modular sofa that offers endless configurations, good lighting that can help to establish a cosy ambience, and a well-designed kitchen in which you can whip up the finest treats with ease,” he says. When it comes to buying furniture, Lim recommends making purchases from authorised dealers, especially in the case of products that may require installation or after-sales support.

08111529 poliform kitchen alea Arcadia
ABOVE The Alea kitchen system from Poliform, an Italian brand available at Space Furniture that’s favoured by architects and homeowners for its sleek designs and broad customisation options. Image: Poliform

While ready stock would save on waiting times, he declares that custom pieces would effortlessly elevate any home’s decor. “However, homeowners should be prepared for an indent period of a minimum of 18 to 20 weeks for such pieces,” he warns. “A mix of both [ready stock and custom pieces] would perhaps allow for more flexibility, although it may not necessarily translate to cost savings.” While a holiday home is undoubtedly enviable to own, there are still many factors to consider if one wants to avoid future complications along the way. “Dos and don’ts are easy to put on paper, but also easily forgotten as a vacation home is often an affair of the heart,” concludes Miaja. “So follow your heart, but make sure your head stays close by.”