Poor property yields in South Africa have investors looking abroad for better returns, and the bonus of a second passport.
With markets in turmoil the world over, and South Africans having to cope with the reality of capital erosion for many years owing to our struggling economy, more and more investors are now looking to diversify with property investments abroad. A bonus for many is the opportunity to acquire a second passport in the process, according to Latitude Consultancy, an investment immigration consultancy.
We’ve seen a slowing of the domestic property market throughout the country, including in Cape Town ⎼ evidenced by the average rental increase for the country coming in at lower than the inflation rate last year. The result? Buyers are starting to look elsewhere for the opportunity to protect their capital and earn solid rental income on their property investments, according to Latitude Consultancy.
‘Many clients are looking for educational opportunities for their children and are attracted to the European or North American residence programme options. Those looking for a passport for ease of travel and who wish to remain living in South Africa will want to consider Citizenship-by-Investment programmes such as those offered in the Caribbean, says Sandra Woest, Senior Director, Market Development Southern Africa, Latitude Consultancy.
‘As the majority of these programmes have a real estate component, they are perfect for those who want to diversify their investment portfolio, see solid capital growth gains and earn rental income while providing greater security for their families.’
A number of countries offer attractive options for investors who have the means to purchase property in Euros or Dollars and achieve currency diversification. Largely based on the returns that tourism brings, these property investment options are in locations where international governments have partnered with the private sector to develop residential and hotel accommodation that meets the growing demands of the tourist sectors. In some countries, a specific residential need is also being addressed.
Many of the destinations that offer property investment opportunities come with an added benefit that has proven popular among South Africans: residency or citizenship rights. These include countries in the European Union and other regions – such as the Caribbean – that offer a far stronger passport than South Africa’s green mamba.
For example, a South African passport affords visa-free travel to approximately 100 countries compared to a St. Kitts & Nevis passport which sits at over 150.
Cyprus, Malta and Portugal are well-known EU options for South African investors, while there are also attractive options in North America and the Caribbean. The Caribbean Citizenship-by-Investment programmes are offered by Antigua & Barbuda, Dominica, Grenada, St Kitts & Nevis and St Lucia. There are also Residence-by-Investment programmes offered by highly sought after countries such as Australia, Germany, Canada and the United States.
According to Woest, when looking at a Residence- or Citizenship-by-Investment programme, a number of factors should be considered, including:
- Likelihood for capital security and appreciation
- Past and predicted future returns on property investments
- The local tax situation relating to an investor and the returns on the investment, including inheritance and wealth taxes
- Ease of travel provided by the passport of the particular country
- Educational opportunities available to citizens
- The number of family members covered by the programme
- The size of the investment required to qualify for a particular Residence– or Citizenship-by-Investment programme.