Where to Invest in Offshore Property

Top 5 Offshore Destinations

An article by Mariana Tolken published by Moneyweb discusses five offshore property hotspots that show promise as retirement destinations, immigration possibilities and big city investments with sound diversification opportunities.

London
This is always one of the top destinations with South African investors, as London shares a similar time zone and has a cultural background and history linked to this country. 30% of central London’s properties will never come up for sale in our lifetime, as they are bound by non-distribution family trusts. The tenant base in London is an added benefit in that it is one of the highest worldwide, with 42% of all Londoners unlikely to become property owners in the city they reside. There is a constant shortage of accommodation in traditional suburbs, which works to keep prices high and capital values increasing. A one bedroom apartment in a reputable London area will cost you at least £250 000, although you would likely need to spend around £300 000 to be in a good neighbourhood. The most expensive penthouse apartment was recently sold in Hyde Park for £100 million.

New York
With the dollar at a record low against all other currencies, the city that never sleeps is the ideal buyer’s market. One of the biggest cities in the world, New York is the global hub of TV, advertising, fashion, music and publishing, rivaling London and Tokyo. Considering the base interest rate of just 2% and this being the biggest economy in the world, this is perhaps the best time to invest. Finding a tenant couldn’t be easier, as there are 8.2 million residents per 790 square kilometres and the population is destined to increase to 9.5 million by the year 2030. Manhattan houses a population of 1.6 million, with an added 1.3 million who commute to work on a daily basis. It also holds two thirds of all jobs in New York, with the highest per capita income in the United States. The average price of an apartment in Manhattan is around $600 000, compared to an average $300 000 in the US.

Australia
Now one of the motivating factors behind property investment in Australia is the country’s appeal among South Africans as an immigration destination. The lifestyle, excellent climate, political and economic stability, as well as the growing population and a GDP on par with most European countries, paints a more than appealing picture. When you add the favourable Sterling Exchange rate, this means that you are likely to get more for your money in Australia. However, there is a strict immigration and visa application process in place and those wishing to buy property must hold a permanent resident visa or a special category visa/permission. Australian property may not be the greatest buy to let investment, as the rental income is not high enough to cover all costs and interest rates are higher than in the UK. However, it is the perfect option for many South Africans as a result of its affordability, the shared language, sunny climate and low crime rate. The average cost of an apartment in Melbourne is about AUS$340 000.

Mauritius
This is without a doubt one of the best retirement options for South Africans not wishing to invest too far abroad, as Mauritius has the irresistible island appeal. It is easy to invest here in South African rands and there is the added benefit of residency for you and your dependants, which means that you can almost feel the sand between your toes. The appeal is heightened by the lack of exchange controls and inheritance tax, as well as the 15% flat tax for individuals and companies. Buying into an Integrated Resort Scheme (IRS) is the only way that foreigners are able to own property on the island. Mauritius is an excellent investment in terms of political diversity and property values are expected to hold. However, it is not the ideal place to invest in buy to let property, as the income is not only very seasonal, but around half of rental income is the norm for letting marketing and management services. The entry and exit costs are also quite steep, including stamp duties of between $50 000 and $70 000 on both purchase and sale, while furniture pack cost in IRS shemes is around $100 000. The starting price for an IRS unit in Mauritius is around $800 000 and could even reach $3.5 million.

Crete
This location was included mainly for its appeal as a holiday home investment option. Crete is the biggest of the Greek isles and offers those in the market the opportunity to diversify their assets and gain a foothold in the European property market at a fraction of the cost in bigger cities like London. While Crete is relatively undiscovered and unexploited, the property market is well established and prices have risen steadily over the last ten years, with the Euro having an appreciating track record. A mortgage can be obtained from a Greek bank for up to 80% of the purchase price at an interest rate of around 5.5%. Letting opportunities are also seasonal, but letting management fees are not as high as in Mauritius. There is capital gains tax that applies, but no inheritance tax. A villa on the island would cost in the region of $200 000 to $300 000 and this would assist, if not virtually guarantee, a residency visa application for the country should one wish to settle there permanently.

The information in this article is courtesy of Mariana Tolken (“Five off-shore property hot spots”, Moneyweb, 15 September 2008).

South Africa property.