A strengthened Rand, coupled with pressure on major currencies, arguably provides the best time for South Africans to invest offshore, especially in property.
This is according Andrew Rissik, Managing Director, and Megan Copley, Director, Sable International Offshore Property who says: “good temporary Rand strength, driven by uncertainty in the East, is putting pressure on the so-called ‘hard currencies’ and we’re seeing a run on commodity prices, all of which is Rand positive.”
Buying property in Europe may seem unattainable to even wealthy South Africans, however, the entry point for offshore real estate investments is lower than most people realise, with lending accessible to most investors, and a minimum investment threshold from R1 million to R2 million.
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Why should South Africans consider investing offshore?
“We are not encouraging a mass exodus out of South Africa, nor are we advocating a skills drain. South Africa is beautiful and its people should enjoy living in the country, but they must never forget to avail themselves of their foreign capital allowances and consider buying offshore assets as part of their balancing and hedging strategy – offshore properties are a great way to do this,” says Rissik.
“What makes it interesting is that it’s a lot easier to get a mortgage on a property in the UK, and in Europe than we often expect. Sable International offer professional real estate advice on property globally, and in many cases where you can put down as little as £75 000 and with a low interest loan, you would be able to get something for £250 000 to £300 000. £250 000 is a sweet spot for the South African investor market.”
Rather build a portfolio where you have low interest rates and high rental yields than the other way round in South Africa where interest rates are high and rental yields are quite low because of affordability, he says.
Which countries offer good property investment options for South Africans?
Germany, UK & Portugal all represent good circumstances for foreign investment at the moment, notes Rissik.
He says Portugal is a great place to invest; an investor or a purchaser can buy a golden visa or the route to a golden visa. This is different; you can actually invest in the property regardless of the option of a passport to European nationality. Property in Portugal is a safe haven, and they have just had an excellent tourism rating.
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“Lisbon is an Alpha city of Europe attracting tech nomads. The city offers employment prospects, good lifestyle and a rich culture. South Africans are drawn to places where they can find a community of other South Africans, and Portugal has already attracted many expat south Africans.”
What makes the UK an attractive option for South Africans?
The UK has been through Brexit and Covid, but it is still a strong market. The Pound is relatively weaker in relation to the Rand at present with it currently sitting at below the R20 mark.
According to Rissik, the UK market is interesting because it attracts so much foreign investment. People have so much confidence in the UK, and value is all about confidence. How you buy and why you buy shows how confident you are about a marketplace and its stability, and the UK property market has always remained one of the most stable.
“Even though there have been dips in property prices, there has been an overall rise year-on-year in those prices. Although there was a period during the recession when property prices came down, they are way up on those previous crash prices again.”
The UK has an abundance of home loans and interest rates are lower
There are property markets in the UK, for instance, big cities within the UK and outer cities where one can buy a property with R2 million and take a mortgage abroad because South Africans can get mortgages in the UK. There are many lenders, over 87 types of lending available and the interest rates are significantly lower than in South Africa, says Rissik.
Which UK cities should South African investors consider?
“Foreign investors should look outside London, as it is one of the most expensive cities in the world. At the moment, most of the property that we sell is in Birmingham and Manchester, or on the outskirts of these cities. There is a strong housing and tenant demand as well as significant infrastructure improvements and government investment in these cities,” advises Rissik.
“New-build properties are great for an investor because there are fewer complications. The developer is accountable for a warranty on the build. All of your appliances and fittings will be new. So, from a practical point of view, there is less maintenance. If you were to put down between £50 thousand and £100 thousand – roughly R1 million to R2 million, you could find an asset worth about £175 000 to about £350 000. And that could be anywhere from a studio to a two-bedroom apartment.”
Offshore investments allow South Africans to grow their wealth
There are many reasons to invest offshore. One is the strong currencies in Europe and Britain, which show lower volatility than the rand, making them safe haven currencies where you can grow an investment portfolio, says Rissik.
“Offshore real estate investments are attainable. With strong and well-considered property investments abroad, South Africans can both grow their wealth through capital appreciation of the asset but also hedge their currency in Euros, Pounds or Dollars, and, in many cases, take a mortgage out at a very low-interest rate or have a passive income via a rental investment. This offers a tangible, solid investment.”
There are risks in offshore property investments, but it is important when looking for property investment opportunities, to find reputable developers with an established brand, and a solid track record, says Rissik.
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