Monday, 10 March 2008

How to buy Overseas Property as a Foreign National?

‘Is it just me, or is the World getting smaller?’

You can get on an airplane, and in 24 hours you’re at the other side of the World !! (Be it New Zealand, New York or even Tokyo for that matter) And with this ability to travel, comes the possibility of investing in property in all 4 corners of the Globe (except in the countries where they have a Bob…..or a Fidel / Raul, who are in charge :(

South African property in global terms, is not as cheap as it was a few years ago, but many Saffers are still under the impression that it is. Therefore, the idea of investing in other countries, has just simply not occurred to us………

But, as South Africans, there are limits to this ‘abundance’ of investment potential. The main factor is due to the current foreign exchange controls that South Africa has in place. These controls stipulate that no South African National may take more than R2m out of South Africa in his / her lifetime.

With this in mind, let’s take a look at buying Overseas Property...........

So why Overseas Property?

1) Overseas Property allows you to protect against economic / political uncertainty.

2) It protects you against the devaluing of the Rand.

3) It allows you to take advantage of booming world economies such as India & Brazil.

4) Some countries such as Mauritius, provide you with residency if you buy property.

So where should I buy?

I’d be telling ‘porkies’ if I told you that this decision is due to research...........because the answer would be LOTS and LOTS of research !!

The Move Channel which is a popular search engine for overseas property ranks the following markets as good investments: Australia, Brazil, Bulgaria, Canada, Canary Islands, Cape Verde, Cyprus, China, Czech Republic, England, Estonia, France, Germany, Greece, Hungary, India, Italy, Latvia and Morocco.

But my choice would be the ‘New World Economies’ which would provide the best property and rental growth. Areas such as Brazil, India, Eastern Europe, certain Caribbean countries as well as Egypt, Morocco and Mauritius are definitely the way to go.

For example, in the Dominican Republic you don’t pay capital gains tax, you get residency and very often Developers can provide financing instead of the local banks.

How much does it cost?

So this is what all investors will look at……….the Cost !! But read on as you might be surprised to hear what overseas property costs :)

Studio apartments in Bulgaria, around the Red Sea or in Brazil start at less than R800 000 which is a bargain compared to what a similar property would cost in Cape Town’s CBD (let’s not even start with how expensive that is……)

Factors to consider before buying?

1) Go on an Inspection Trip or an Overseas Property Exhibition:

Inspection trips are usually package tours that aim to give you an overview of what the properties will look like once it has been built

Tip: You can also consider this as a ‘free holiday’ if you decide not to buy :)

2) Arranging Finance:

If you can, pay the full price in Cash.

Many of the emerging countries do not have banking systems that are as refined as in South Africa.

Tip: No jokes……….South Africa has one of the best banking systems in the World !!

3) Seek Specialist Advice:

Seek specialist advice from estate agents, solicitors, architects and surveyors in the country where you plan to invest.

Ask questions, including costs that the local authorities may charge, but that you might not be used to paying when buying property in South Africa.

Tip: There are ALWAYS hidden costs with overseas purchases, so make sure that you are aware of any ‘extra’ costs that might come your way !!

4) Open a bank account in the country where you choose to invest:

Some countries require a Certificate of Importation for any money you bring in from South Africa.

Tip: A local bank account allows you to monitor all revenues / costs more affectively, as it is displayed in local currency.

5) Make your offer in Writing:

Ensure that your offer is subject to the signing of a Contract.

Tip: This sounds seriously obvious, but okes still get this wrong !!

6) Never sign a contract in a language you do not understand:

The contract should include a clause stipulating that the English contract takes precedent in the event of a clash with the contract in the local language.

Tip: Probably the most important factor of all !!