As 2020 saw the world up-ended by pandemic-induced travel restrictions, many investors looking to stash their cash in a cross-border bolthole, holiday pad, or buy-to-let were no doubt forced to place buying decisions on hold. However, international buyers are expected to return to property hotspots this year as vaccination programmes gain momentum and investors re-assess their post-lockdown brick-and-mortar portfolios.
Kate Everett-Allen, head of residential research at UK property group Knight Frank, says housing markets in major cities across the globe are likely to benefit from a wave of international demand as travel and quarantine rules are relaxed.
She says second-home and buy-to-let sales could be further underpinned by record-low global interest rates, softer pricing, and currency volatility. Mortgage repayment and tax holidays, which have left surplus cash in investor’s pockets, will also boost demand.
But clearly the world has changed. Everett-Allen cites a number of new trends that could influence the demand, supply, and return prospects of individual housing markets. For instance, the decline of international students and the switch to remote learning has led to a drop in rentals in some cities, which is likely to continue to impact buy-to-let returns — at least in the short-term.
On the flipside, demand for holiday homes and weekend getaways is set to strengthen in resort markets across popular sun and ski belts — from Aspen to Barbados to Cannes — no doubt on the back of a newfound appreciation for travel freedom and global mobility. Also, the rapid rise of the “digital nomad” and an increasingly mobile workforce will prompt more countries to introduce so-called “golden visa” or “citizenship-by-investment” programmes. The UAE, for instance, recently announced its intention to introduce such a scheme this year.
Offering residency or citizenship rights in exchange for fixed foreign investment, especially in a post-pandemic context, is a no-brainer: on the one hand it will help governments restore Covid-hit economies while, on the other, investors obtain easier access to travel, live, work, and study opportunities abroad. There are tax benefits too. Property-related residency and citizenship schemes have, in recent years, become particularly popular among South African investors looking for a plan B as a hedge against political, economic, and currency instability in their backyards. In fact, it seems that the uncertainty created by the onset of Covid-19 has promoted a fresh wave of interest among South Africans to acquire a second passport via an offshore-real-estate acquisition.
Amanda Smit, managing partner of international migration-investment advisory firm Henley & Partners in South Africa, says her company saw a massive jump in inquiries about property-linked investment migration options in the second half of last year. Though Portugal and Malta still rank as the most popular residency-investment destinations among South Africa’s high-net-worth individuals, Smit says interest in Montenegro in the Balkans and St Lucia in the Caribbean are gaining traction too.
Although it doesn’t offer a citizenship-by-investment programme as such, she notes that New Zealand is also appearing increasingly on South Africans’ radars as a preferred relocation and retirement destination. New Zealand — specifically Auckland — ranked as the fastest-growing luxury housing market in the world in the third quarter, according to Knight Frank’s latest prime global cities index. Auckland recorded house price growth of a solid 13% in the 12 months to the end of September, versus the index average of 1.6%.
New World Wealth analyst Andrew Amoils believes New Zealand’s newfound popularity as a real-estate-investment destination is partly due to its low Covid-19 fatality rate. He says other countries that appear to have handled the pandemic well could try to up their status in the wealth migration stakes this year, either by joining the citizenship-by-investment fray or lowering the entry requirements of existing programmes. Currently, most countries require a capital outlay equivalent to at least €350,000 — €500,000 (about R6.3-million to R9-million).
That’s good news for South African investors whose wealth took a sizeable knock in rand terms last year on the back of a weaker currency. Of course, as offshore real-estate-investment opportunities become more accessible to South Africans, choosing where and what to buy could make for a rather daunting task.
For that reason, Wanted has singled out five offshore real-estate destinations we believe are currently worth a second glance. The investment case for each will depend on whether you are looking to buy property to obtain a second passport, as a future emigration route, as a buy-to-let investment for portfolio diversification purposes, or as a holiday or retirement home.
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The Caribbean’s appeal as an investment destination lies not only in that it offers you a vacation escape to a tropical island: it also provides second-passport benefits.
At an entry level of around $200,000, the Caribbean is a much cheaper option for South Africans than most other citizenship-by-investment programmes, says Nadia Read Thaele, CEO of second residency specialists LIO Global.
Moreover, a real-estate investment in the Caribbean is a US-dollar-based asset, which provides good currency diversification if you already have some of your offshore assets in euros or pounds. The Caribbean islands’ thriving tourism sector also makes it easy for investors to earn a rental income (average 3%- 5% a year in dollars) from their properties. Investors have a number of Caribbean islands to choose from, but Read Thaele reckons the schemes offered by the Commonwealth of Dominica and Grenada are the most attractive.
Neither country restricts dual nationality and has fast processing times, with full citizenship possible within three to six months. There are also no mandatory visits, minimum stay periods, or interview requirements. In Dominica’s case, properties can be sold after three years, while Grenada’s holding period is five years. Both passports offer visa-free travel to more than 100 countries including the US, UK, Schengen countries, and Hong Kong.
Dominica’s entry-level requirement is $200,000 while Grenada requires a purchase of at least $350,000 for single-title ownership or $220,000 for multi-title ownership. Read Thaele says the window of opportunity to acquire citizenship at a discounted rate in Dominica is, however, closing fast as the government is looking to increase the costs of its programme sometime this year. Grenada’s investment programme offers an added benefit via its bilateral investment treaty with the US, which allows citizens of Grenada to apply for an E-2 visa to live in the US.
As such, foreign investors often use Grenada’s real-estate-investment programme as an alternate route into the US. However, to qualify for the E-2 visa, an additional investment of about $100,000 to $150,000 is required. Grenada is also the only Caribbean country whose citizens have visa-free access to China.
WHAT TO BUY: DOMINICA
Investors have an array of government-approved, world-class resort developments to choose from. LIO Global is currently marketing investment opportunities in Secret Bay, an acclaimed Relais & Châteaux property recently voted Travel + Leisure magazine’s number-one resort hotel in the Caribbean. The six-star resort offers ownership opportunities at The Residences at Secret Bay, which comprise 42 luxury villas spectacularly situated on a cliff top where the rainforest meets the sea. Each villa is fully furnished and offers owners access to the resort amenities. Part ownership of a villa costs $208,000 (including citizenship-application costs), while full ownership of a villa will set you back from $1.22-million.
WHAT TO BUY: GRENADA
LIO Global, Monarch & Co International, and Pam Golding International are all selling properties at Kimpton Kawana Bay, a new five-star beachfront resort overlooking the swanky Grand Anse Beach. The price for part ownership of a suite starts at $220,000. However, that excludes additional government, processing, and legal fees for a citizenship application. The resort will comprise 146 guest rooms and suites and luxury amenities such as a spa, gym, chef driven restaurant, beach bars, and watersports facilities. Investors who buy full ownership of a suite will be entitled to two weeks’ free usage a year.
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It’s no secret that Germany is one of the most politically and economically stable countries in the world. So if you’re purely interested in offshore diversification through a buy-to-let opportunity in a strong, developed economy, the edgy capital of Berlin offers a particularly compelling investment case. Berlin has, in recent years, become an increasingly sought-after place to live and work and attracts people from across the globe because of its reputation as a European hub for tech start-ups and other innovative industries.
As such, the city’s housing market is one of less than a handful in Europe that still showed price growth (3.1%) in the first half of 2020 (according to Knight Frank).
Tom Bland, wealth manager at real-estate-investment advisors IP Global in South Africa, says Berlin boasts a strong rental market, which is underpinned by robust population growth. It’s already the most populous city in the EU with 3.7-million residents. As more than 80% of Berliners live in rental properties, demand typically exceeds supply, which will continue to support rental and capital growth over time, Bland says.
Berlin’s economy has achieved an average GDP growth of 5.6% a year since 2016, far outpacing the national average. The city’s GDP contracted by only 2.7% last year by recent estimates and is expected to rebound by nearly 5% in 2021, once again outperforming other major German cities. Berlin is a city of distinct neighbourhoods, each one looking vastly different from the other. This is largely due to the history of the city, which has allowed for its areas to grow and develop their own individual cultural identities. Two neighbourhoods most often targeted by buy-to-let investors are Mitte and Charlottenburg.
Fast-paced Mitte is the geographic, political, and economic old centre of Berlin and draws many residents due to its proximity to key employment hubs and hipster bars, coffee shops, and restaurants.
Charlottenburg, to the west of Berlin, tends to attract a more affluent crowd, who frequent the area’s luxury shopping district, sidewalk cafes, fine-dining restaurants, and leafy parks. A new neighbourhood is currently emerging on a 61ha previously unused site between Mitte and Charlottenburg. The massive mixed-use regeneration project, known as Europacity, is already home to Berlin’s new Central Station and is expected to offer apartment living to at least 2,000 people on completion in 2025.
WHAT TO BUY
The highest demand for rental apartments in Berlin is for studio, one- and two-bedroom units. IP Global is currently marketing investment opportunities in The Ambassador, a new residential tower in Mitte within a one-minute walk of the Heinrich Heine Strasse U-Bahn Station. Studio apartments are up for purchase from between €210,000 to €352,000. The developer is offering investors a 4% a year rental guarantee for the first two years. Mortgage finance of up to 65% of the purchase price is available.
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Located below Croatia in southeast Europe, Montenegro only recently started to appear on our radars following the local government’s introduction of a citizenship-by-investment programme two years ago. The former Eastern Bloc country offers Montenegrin citizenship to foreigners in exchange for a direct investment starting from €350,000. It includes a cash donation to uplift underdeveloped areas as well as an investment into an approved real-estate-development project.
Smit says a key attraction of Montenegro’s investment programme is that it offers a relatively quick and easy route to a second passport: full citizenship for the applicant and family members (spouse, minor children, and dependent adult children over the age of 18) can be obtained within roughly six months. Only one visit to the country is required to provide biometrics and no physical stay is necessary. She says applications are nevertheless subject to a stringent vetting and due diligence process, including thorough background checks.
Travel freedom within the Schengen area, among others, is a major drawcard. So, too, is the fact that Montenegro is an official EU candidate country with EU membership expected to be granted in 2025. That means citizenship offers the potential future right to live, work, and study in any EU member state. The country is also an attractive holiday destination. With its rugged mountainous landscape, medieval villages, and traditional Venetian architecture, it’s not surprising that Montenegro has become a magnet for adventure travellers. It also offers a mild climate, laidback Mediterranean lifestyle, low cost of living, and a multinational community. Moreover, its former Communist legacy has been replaced by political and economic stability.
WHAT TO BUY:
Those interested in staking a claim in Montenegro shouldn’t linger too long as its citizenship-by investment programme will be limited to 2,000 applicants within a three-year period. Besides an economic contribution of €100,000, investors are required to splurge a minimum of either €450,000 into an approved real-estate development in the capital of Podgorica or in the coastal region of Montenegro; or €250,000 into an approved project in the northern or central region of Montenegro. Cape Town-based immigration and financial-services company Sable International is currently marketing Porto Montenegro, a luxury residential and marina development in the Unesco-protected Bay of Kotor. The mixed-use project comprises 320 waterfront units, a 450-berth super-yacht marina, and about 80 retail outlets. The development offers a 24-hour concierge and reception. Prices of studio, one-, two- and three-bedroom units range from €276,000 to €3-million.
4. THE UNITED STATES
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South Africans looking for the easiest route to emigrate to the US are gravitating towards the government-endorsed EB-5 immigrant-investment programme. However, applying for an EB-5 visa does not come cheap. It requires an investment of $900,000 in a government-approved real estate development in a so-called “designated targeted employment area”. An investment in the EB-5 programme gives the investor (and their family) quick and easy access to a green card to live, study, and work anywhere in the US.
A green card affords people permanent residency in the US and can lead to future citizenship. Investments in dedicated real-estate projects can typically be sold after five years. South African investors can apply for the EB-5 visa through a number of South African-based companies such as American Dream, Pam Golding International, and Sable International. EB-5 immigrant applicants have a range of government-approved real-estate developments to invest in. However, some sectors of the US real-estate market will outperform others.
Also, not every development is guaranteed to deliver a solid return on investment by the time you are allowed to cash out. So make sure you invest in schemes backed by developers with good track records.
WHAT TO BUY:
One of the EB-5 projects currently available for investment through Pam Golding International is Hollywood Circle, a 25-storey, mixed-use development in south Florida’s Downtown Hollywood, which is a stone’s throw from the area’s scenic beaches. It will include 397 residential units, a uniquely branded 104-room boutique hotel, a supermarket, and additional retail space for shops and restaurants. Chris Immelman, who heads Pam Golding International, says Downtown Hollywood has experienced massive growth during the past several years, partly due to its proximity to major metros such as Miami and Fort Lauderdale.
Marketing manager at Sable International Sean Ritchie says the company currently favours the assisted-living-facilities sector. Ritchie says while these developments may not sound sexy, the demand for senior housing in the US is predicted to grow from 1.4-million units in 2015 to 3.2-million units in 2040. Sable has teamed up with US developer Christian Tyler Properties, LLC, which offers investors several assisted-living projects to choose from, mostly in North Carolina, Arizona, and Tampa, Florida.
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One of Europe’s oldest countries, Portugal now ranks among the most popular offshore-property-investment destinations among well-heeled South Africans. That follows the country’s introduction of the Golden Visa programme in 2012, which provides foreigners with residency permits in exchange for an investment of at least €350,000 in approved real-estate developments. Apparently, many South Africans who are investing in the Golden Visa programme have already relocated permanently to Portugal — or plan to — given the rise in remote working.
And who can blame them? The country offers easy access to the rest of the EU and the UK, scores highly on several quality-of-life rankings, has great weather and beaches, a rich food-and-wine culture, and a well-established network of quality healthcare and educational facilities.
In addition, there is no wealth, inheritance, or (overseas) pension tax. Though the country was historically seen as a poor cousin to some of Europe’s more developed economies, it has recently achieved GDP growth in excess of the EU average on the back of burgeoning technology, media, and finance industries. Though house prices in Portugal have risen strongly in the past few years, real estate is still relatively cheap in European terms.
The coastal capital of Lisbon, as well as Porto further north, have become vibrant tourism and business hubs, yet both cities still maintain their historic charm. Interestingly, Porto was rated as the best small city in the world to relocate to in Monocle magazine’s inaugural Small Cities Index. To qualify for residency, investors and their families need to spend seven days in Portugal in the first year and 14 days a year for the two subsequent years. After five years, legal residents become eligible for citizenship. Main applicants may include their spouse, minor children and adult children who are financially dependent, as well as parents of any age.
WHAT TO BUY:
A number of companies offer real-estate investment opportunities in Lisbon and Porto. Pam Golding Inter-national’s Immelman prefers up-and-coming areas that offer regeneration potential given that such areas haven’t seen the same price increases as those in well-established neighbourhoods. He singles out Marvila in Lisbon as an example: “The area could be best described as the Woodstock of Lisbon, sans the crime and drugs.”
Vila Nova de Gaia on the bank of the Douro River, known as the hub of Portugal’s port-wine industry and for its sandy beaches and picturesque, tiled houses that line its narrow streets, is also luring more Golden Visa investors. Pam Golding International’s latest offering is a new hospitality development in Porto, the Lapa Porto Hotel, which will operate under Marriott’s Renaissance brand. An investment of €350,000 includes full EU residency and a free stay of seven days a year in the hotel. Set for completion in early 2023, the hotel will comprise 163 rooms, a convention centre, restaurant, and rooftop swimming pool. The developers are offering a net income return of 3% a year to all investors and will repurchase investors’ shares at the original purchase price after five years.
A word of caution…
Buying property abroad is not for the faint of heart and, like any other investment, is not risk-free. Make sure of the following:
- Choose a country that offers a transparent route to property ownership and residency/citizenship programmes, with clearly defined investment regulations and a formal legal framework.
- Choose your service provider carefully by conducting your homework. Look at the company’s track record, global presence, compliance, and due-diligence procedures.
- By all means, use South African advisors to guide your purchase decision, as long as they are working with local partners who have knowledge and experience of the jurisdictions in which they operate.
- Get clearance from the SA Reserve Bank to take your money offshore.
• From the March edition of Wanted, 2021.