Buy. Hold. Sell

Mortgage strategy

To better understand the real costs global buyers face when purchasing, holding and selling prime residential property, we have created a scenario benchmark for global markets. It assumes a non-resident buyer acquires a property valued at US$2 million (or local currency equivalent), holds it for five years and sells without capital growth. The model facilitates comparison between markets on an equal basis, incorporating the full spectrum of transactional costs, ownership taxes and exit charges.

Broadly across our global markets, the largest change we have seen over the past five years has been in the rising tax costs imposed on buyers of prime residential properties. Governments across the world have been gradually increasing stamp duties and transaction taxes on foreign buyers to raise revenue and tackle rising housing unaffordability.

Singapore is the most expensive market across our World Cities in which to transact, driven by its Additional Buyer’s Stamp Duty (ABSD), with a 60% duty to the purchase price for international buyers. This cost alone amounts to just under three times the total fees of the next most expensive market in our list, Barcelona. Here, the regional government has increased the stamp duty and transfer tax for foreign buyers purchasing a home in the city from 1.5% to 3%.

Across the 30 markets we monitor, the average additional cost stands at 15% of the purchase price. Asian markets have the lowest average additional costs, averaging 9.2% (excluding Singapore). However, when including the island nation to the average, it sits at 13.6%. Hong Kong halved its stamp duties imposed on foreign buyers to boost the competitiveness of its market in 2023. Total additional costs are as low as 5% in Seoul and 6% in Shanghai.

Costs associated with the buying process make up just under two-thirds of the total buy-hold-sell costs on average. This is particularly acute in the United States, where agency fees (5% to 6% of the sales price split between buying and selling agents) and transfer taxes have historically been paid by the seller. Recent changes mean sellers no longer pay the buyer’s agent’s commission; it’s now negotiated directly between the buyer and their agent.

In the United States, the cost of holding is also significantly higher than elsewhere, largely due to substantial annual property taxes, totalling, on average, 6.3% of the purchase price over five years. In APAC and EMEA markets, where occupancy taxes are more limited, this value is 1.6% of the purchase price in APAC and 1.3% in EMEA.

Markets across mainland China remain the most affordable to buy, hold and sell across our World Cities, with an average total cost of 4.3% of the purchase price. China only has two markets which currently have an annual occupancy tax, which applies to only one of our World Cities - Shanghai.

Mortgage conventions vary significantly around the world, shaped by local legal frameworks, financial systems and cultural attitudes towards homeownership. For many looking to purchase prime residential properties, the decision to finance, even with the liquidity to pay outright, is rarely about affordability. More often, considerations around capital efficiency, risk management and long-term financial structure play a role.

One of the most compelling reasons prime buyers opt for mortgages is to preserve liquidity. Cash tied up in a property is capital that cannot be deployed elsewhere. In an environment where private equity, venture capital, or even short-duration fixed income can yield attractive returns, immobilising millions in a single asset, especially one that is illiquid, can be suboptimal. The cost is not the property itself, but the opportunity cost.

By financing a property, buyers of prime residential property can balance allocation across asset classes, geographies and liquidity profiles. This is particularly important for those with complex balance sheets or family office structures. Despite higher interest rates, leverage remains a strategic tool. In jurisdictions with low or negative real rates, debt can serve as a hedge. Where mortgage interest is tax-deductible, it adds further incentive, though recent policy changes, particularly in the United States, have moderated some of these benefits.

Mortgages can be used to structure ownership through trusts or corporate vehicles, aiding estate planning and cross-border tax efficiency. These structures can interact with tax and ownership regulations, making them particularly relevant for globally mobile individuals with assets in multiple jurisdictions.

Mortgaging a property can also serve as a form of asset protection. In some legal systems, properties with significant debt attached are less attractive litigation targets. Additionally, financing through a mortgage can obscure full ownership details in public registries, offering a layer of privacy for global purchasers.

In the prime segment, mortgaging is typically a strategic choice rather than a necessity. When applied judiciously, debt serves as a financial instrument that enhances both flexibility and long-term resilience.