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Good time to invest in offshore real estate, but do research

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Investing in property abroad has extensive advantages such as putting your money in another possibly less volatile currency, and the potential for income by letting the property, says George Radford, IP Global’s head of Africa.

He says other advantages include:
* Its ability to generate long-term wealth.
* How it can be leveraged in tier on markets with historically low interest rates.
* Higher levels of consumer protection in developed markets.

In some countries, such as Portugal, Malta and those in the Caribbean region, buying property abroad can also help South Africans obtain residential and even citizenship rights.
IP Global has found that for South Africans, the most popular cities for offshore investment are in the UK, with London, Manchester, Birmingham, Liverpool and Leeds drawing most attention.

The UK is followed by Germany – Berlin, Frankfurt and Dusseldorf are well-favoured by investors – and third is Portugal, with Lisbon the biggest draw.

Lisa Bathurst, of international property specialists Hurst & Willis, agrees with IP Global’s assessment of Portugal. She says South Africans are increasingly buying property in Portugal and seeing excellent returns on their investments, as well as securing European residency for their families.

Portugal also offers a discounted real estate investment option which qualifies for the Golden Visa programme, although it comes with strict criteria.

Some countries in Europe and in the Caribbean offer Golden Visa programmes which essentially offer some form of residency and even citizenship in exchange for investment in that country.

Many countries require a minimum investment of 500 000 euros (about R7.2 million), but Portugal will settle for an investment of 350 000 euros, although you can’t necessarily buy just where you want.

“The discount makes one of the most popular residence-by-investment programmes even more attractive,” says Bathurst. “However, there are very strict criteria for taking up Portugal’s entry-level investment programme, such as specific areas in which you have to invest.

“Although this option has been around for a few years it has been challenging to find good stock that meets these requirements while also being a good investment for our clients.”

Places like Lisbon and Cascais can be expensive, but Bathurst says she is particularly excited about Porto and the Silver Coast, and options for farmers in the Alqueva Dam Project area.

Another advantage of investing in Portugal is you don’t have to live there to benefit from the Golden Visa programme. “The Portuguese programme only requires investors to spend seven days a year in the country. Some other programmes require people to spend a lot more time or even physically relocate,” says Bathurst.

Both Bathurst and Radford caution it is essential for potential investors to do their homework and use the services of professionals. Radford says: “Because there are tax considerations to investing in overseas property you need to ensure these laws do not act against you.” 

South Africans can invest R11m offshore – a R1m discretionary and a R10m non-discretionary allowance. Radford says South Africans should investigate whether a double taxation treaty applies. Other considerations include being aware of transfer or stamp duty percentages, capital gains tax, income tax and inheritance tax.

Bathurst says: “People who do not know the areas in Portugal are jumping on to the bandwagon. We have come across a few cases where a property worth 250 000 euros has been dressed up to look like 350 000 euros, leaving investors badly burnt. It is critical to use credible property consultants who do their own, on-the-ground research and preferably invest in properties themselves.”

Radford says the offshore property market is exciting for its growth potential, income generation potential, and for allowing African investors to be well hedged when they invest in more politically and economically stable markets in Europe.

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