Why there is an asset bubble in Asia

Investors will have been interested to note that the Asia Pacific market declined last week, after data earlier in the day revealed that China’s economic growth was at its slowest rate in nearly six years. According to the National Bureau of Statistics of China (NBS), GDP rose by 7% in the first quarter of 2015, and this figure represented a slowdown from 7.3% during the last three months of 2014.

This is impacting heavily on stock market activity, while the Japanese Yen (JPY) is also weak, while the projected cuts to economic growth and inflation have also taken their toll. International investors will have also felt the impact of changing taxation laws, which have been implemented as part of widespread, political reforms.

The Laws of taxation and International Investment

The laws of taxation are constantly evolving, as political and social shifts trigger aggressive reforms. Nowhere has this been more pronounced than in the Asia-Pacific region, where a Presidential review has forced an overhaul of all existing legislation and triggered an increase in the overall rate of taxation.

This is misleading, however, as countries in this region still boast a comparatively low tax rate in the global market. The average total tax rate stood at 36.4% at the end of 2014, for example, with only the Middle East region boasting a lower figure. So while residents and business-owners in Asia and the South Pacific may now be required to pay more, they are relatively well-off within the global climate.

The Tax Rate for Overseas Investors

Despite this, the portents are not so rosy for overseas property investors. These individuals are forced to pay a significantly higher tax rate than domestic buyers in regions such as Singapore and Hong, for example, and this marks the Asia-Pacific area as the single most costly place for foreigners to invest their hard earned income. While some may claim that it is good practice for a government to offer tax relief to local investors while recouping this income from those overseas, there is a counter-argument which suggests that this is detrimental to the economy in the long-term.

If you take the current global economy, for example, property market saturation in London and similar metropolitan regions is forcing investors to look overseas. This creates opportunities in luxurious Asian-Pacific locations such as Singapore, Hong Kong and Australia, which could in turn drive wider economic growth and prosperity. The addition of a ‘foreign investor’ premium may deter wealthy individuals from considering this market, however, both in terms of the cost of housing and all subsequent tax levies.

Balancing Cost and Profit: How to Tailor your Investment Portfolio

If you are currently looking to diversify your real estate portfolio, higher levels of taxation do not necessarily mean that the Asia-Pacific market should be avoided. Your decision must be taken by balancing this premiums and additional costs in relation to potential returns, as you calculate both short and long-term gains and compare these with alternative markets. Be sure to take into account variable rates of tax and stamp duty across alternative nations, making accurate estimates before arriving at an informed decision.

In addition to this, you should also commit to partnering with an industry expert that can help you to manage your international assets. Investment management experts such as Shiznit Stocks provide a relevant case in point, as they specialise in identifying the best penny stocks to watch and can help investors to optimise the profitability of their portfolio. With expert guidance and an appreciation of costs, it is possible to profit even in international markets where investors are subjected to inflated premiums.