Traditional property ownership in global cities including New York, London and Paris were made purely for offshore investments in hard currency.
However, private wealth and property professionals agree that the majority of South Africans who own property abroad are increasingly seen to hedge their options on more than traditional income and capital appreciation.
Latest trends point to the benefits derived from foreign residency and citizenship as major attractions for all levels of wealthy South Africans. Low level tax regimes and no exchange control restrictions are no longer the only prospect of foreign residency. Unbeatable travel opportunities around the globe facilitated through any number of visas that accompany residency packages, is the added opportunity of acquiring permanent residence abroad.
Paula Bagraim, Partner Legal Services International Tax Planning at Maitland Group says: “High net worth South Africans are continually investigating sound property purchasing opportunities abroad, as the trend for traditional second home ownership in international cities such as New York, London and France continues.”
However, wealthy investors are open to the consideration of other jurisdiction areas. “In addition to tax benefits, opportunities of residency or citizenship impact on the overall attraction of these destinations, and this is not only from a pure investment perspective.”
Foreign countries that for some time have offered SA residency, including Mauritius, Seychelles, St Kitt and Nevis and Monaco remain favourite choices.
Bagraim says factors such as close proximity also influence the popularity of these destinations. Short commuting times of four hours from Johannesburg to Mauritius allow more frequent visits, and as a result family holiday homes where residency is an added extra, are highly attractive.
Chris Immelman MD of Pam Golding Properties International Projects Division says London remains the top property investment destination for South Africans. “Property in London offers excellent investment value property for those looking at pure investment with yields of between 4 and 5%.” South West London has long been a favourite investment hub for South Africans, having shown the best price growth of 6.6% per annum in greater London for the past year he says.
One-bedroom apartments in London have a good rental upside and longer term capital appreciation. Buying trends show the majority of purchases from SA to be ‘sight unseen’ of off-plan purchases purely for investment purposes.” He says as much as 90% of purchasers never occupy these apartments, and many are viewed on behalf of SA purchasers by relatives or friends resident in London.
Lanice Steward of Knight Frank says although only anecdotal evidence exists regarding the numbers of South Africans who own property abroad, London remains a firm favourite. “What has however changed is a growing number of investments into smaller London apartments as opposed to large family homes in the country. “This is partly due to growing numbers of young adults leaving South African homeground to work abroad while their families select property investments for foreign income streams,” said Steward.
Indian Ocean Islands
What attracts South Africans to Mauritius and Seychelles are the additional investment benefits of lifestyle as well as foreign residency. “This is not to say that the financial returns have been shabby in Mauritius and Seychelles – on the contrary, strong annual capital growth of approx 6 to 8% have been the order of the day – coupled with short term rental returns of 4 to 6%.” says Immelman.
He says Mauritius is traditionally a South African family purchase for annual holidays that started out with smaller apartment units and is now more villa oriented.
Houses in the Seychelles on the other hand, tend to be larger as owners commonly entertain friends and extended families. PGP’s new development at Eden Island illustrates this popular trend, where 37% of the 430 unit sales between 2006 and 2013 went to South Africans. Buyers are willing to pay entry level prices from USD 475 000 for a one-bedroom unit, while the most sought after unit sizes are three-bedroom maison or three-bedroom apartments starting at USD 850 000.
Malta and Portugal
Since the Maltese Government’s announcement in March this year of allowing South Africans residency in Malta through property investments as low as €220 000 or roughly R3 million, interest in property investments, in particular that of the buy-to-let market, has grown.
This offer also includes property rentals of a minimum of €8 750 per annum, or approximately R9 500 per month. Possibly the most popular feature of the residency application is that when granted, the residency card facilitates a Schengen visa (not including the UK) renewable annually.”
June this year saw the most recent foreign residency offer to South Africans property buyers. Interest around Portugal’s Golden Residence Permit has been sparked from all ends, despite the misgivings of the EU property market following the global recession. Tax specialist KPMG has launched an advisory service for this product, while Pam Golding Properties is in advanced stages of preparation to launch a residency property scheme in Portugal.
Industry professionals say Australia, North America, Canada as well as some Mediterranean and Northern European countries have lost favour among South African investors, partly due to lifestyle choices and no residency opportunities. Reduced numbers of purchases seen in Greece, Italy and Spain are directly related to economic instability, whereas Australia’s stable economy demands high entry levels into the property market.