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 !!

Want to buy property in the UK as a Foreign National?

So you’ve been in London for a few years now…….and although you are not ready to head off home to South Africa just yet, and you’ve started thinking of buying property in the UK………

1) But where do I start?

2) And is it possible to secure financing with my current visa?

3) And what are the chances of qualifying for a 100% Mortgage?

So, let’s have a look at the FACTS:

Only a small proportion of UK Mortgage Lenders accept applications from Foreign Nationals who do not posses permanent right to reside in the UK:

So, What does this mean in ‘Saffer Lingo’?

- If you are on a 2 year Working Holiday or Student Visa, then aikona you can forget it !!

- If you are on a Highly Skilled Visa or a Work Permit, then LADUMA ,you have just advanced to the next step !!

Of these UK Mortgage Lenders, the fundamental principle they all apply in respect of applicants of Foreign Nationality, is that they must have been in the UK for a minimum of 18 months, and they must possess a suitable work permit (with at least 1 year to expiry) which enables them to work in the UK.

So, again, What does this mean in ‘Saffer Lingo’?

- If you have a HSMP or Work Permit and have not been on it for 18 months or more, then Jammer Boet, you are outta here !!

- If you have a HSMP or Work Permit and have been on it for 18 months or more, then JOU Doring, you are in the money !!

It is possible to obtain a 100% mortgage as long as the applicant is a Doctor, Dentist, Accountant, Solicitor, Veterinary Surgeon, Teacher, Pharmacist or Ophthalmic Optician AND they are a registered member of the appropriate UK Professional Body.

- In some circumstances, Nurses can also qualify for a 100% mortgage but, generally, the maximum available is 95%.

- So I guess all those years of studying in SA, before you came to the UK did count for something………:)

University Graduates can also qualify for 100% mortgages but they must have graduated from a UK University:

- The minimum period they must have been in the UK is 18-24 months and they must have 2 years left on their visa.

So, to conclude: YES, it is possible to buy property in the UK, provided that you are on the correct visa / permit, for a minimum period of 18 months or more.

Horizon Consultancy – South African Property Investment Event , 6th April 2008 - London, United Kingdom

Our South African Investment Event will be hosted at the Wimbledon Park Golf Course (http://www.wpgc.co.uk/) in London, UK on Sunday, the 6th April 2008 from 12:00 to 15:00.

For a map of the location, click HERE !!

We will have several Cape Town property developments available on the day, but our flagship Development will be the Stellendale Village in Kuils River, Cape Town.

Stellendale Village is in its 4th Development Phase, due to the success of the previous 3 phases. The 1st and 2nd phases have 100% tenant occupancy.

The Development is situated next to the Stellenbosch Arterial in Kuils River , and a stones throw from the currently under construction, Zevenwacht Mall. The Development's location allows for direct access to the N1 and N2, and is close to schools and sport amenities.

A Summary of the Development is as follows:

· 5% DEPOSIT secures unit! (No other costs until transfer)
· 3 Bedroom, 1 or 2 bathroom with optional garage
· Estimated occupation beginning 2009
· 100% financing available for qualifying clients
· Estimated levy: R380 p/m
· Estimated Rental Income R3 600 p/m
· Freehold Title
· Home Owner's Association
· Controlled Access & Security
· 24 hrs Internet Connectivity & DSTV enabled
· Automated Irrigation
· Includes Hob and Oven

For more information on Stellendale Village, click HERE !!

If you would like to attend this Investment Event, please register on our website under 'Investment Events' as numbers are limited: www.horizon-consultancy.com
Kind Regards,

The Horizon Consultancy Team

http://www.horizon-consultancy.com/

Property Review - Turkey

Turkey – Where East meets West

Fast Facts

• Associate Member to European Union (Candidate to Full Membership)
  
• Registered Economic Growth of more than 8% in 2004 - 2005.
  
• Capital: Ankara
  
• Population: 71 million
  
• Currency: New Turkish Lira

Economic Overview

‘So, just to confirm, you would like the mezes as a starter, the kebab as the main course and the baklava for dessert? Would you like any strong, almost oil like, coffee with that? :)

As you await the arrival of your food, you can’t help but survey your surroundings, expecting a Turkey you envisioned in books and movies…………just to find that it’s not all a 3rd World marketplace teeming with camels, men in white linen and oceans of sand.

Welcome to the real Turkey.........

Turkey is a developed country, with a political system established in 1923, under the leadership of Mustafa Kemal Atatürk, following the fall of the Ottoman Empire in the aftermath of World War I. Since then, Turkey has become increasingly integrated with the West while continuing to foster relations with the Eastern world.

The Islamist-based Justice and Development Party, which won a landslide victory in November 2002, has been a powerful force behind resolving many of Turkey’s long-standing economic problems.Prime Minister Recep Tayyip Erdogan early identified EU entry (as he should :) as his government’s key priority. He has pushed reforms to the court system and increased freedom of speech, long restricted my military influence.

But most importantly, the new government presided over dramatically better management of the economy.

But let’s have a look at what the graphs have to say:

As you can see, there is a sharp increase after 2002 when the Justice and Development Party started their reforms to betterment of the Economy.

For decades, Turkey has suffered annual inflation of 25% to 106% per annum. Runaway inflation was successfully brought down from a decade’s old double-digit levels to a more acceptable 8.6% in 2004, and 8.2% in 2005.

Though inflation has unexpectedly picked up to 10.5% in Q3 2006, due to the rise in oil prices and various supply shocks, the authorities will have no truck with renewed inflation, and a tightening of interest rates by 4% in June, and a further 0.25% tightening in July, is expected to squeeze the higher inflation out of the system.

Have a look at the nosedive that inflation has taken since the 1980’s!!

Turkey has recently experienced a strong economic performance – a 5.8% growth in 2003, 8.9% in 2004 and 7.4% growth last year. Because of the tightening of interest rates, GDP growth to the third quarter of 2006 was a restrained 5.9%, and the full year figure is likely to come in lower. But although the graphs above tell a story of a country on the up, the biggest hurdle that Turkey has to cross is becoming part of EU……….and this has been met with strong opposition from France and Austria :( Therefore, analysts expect EU accession negotiations to be difficult and slow.

Property Market Review

So, if EU accession is the only thing that prevents Turkey from becoming a viable investment option, why are investors so eager to become part of this Juggernaut while things are still relatively affordable? Well, I’ll tell you……….

House prices continued their increases on 2006, following very sharp increases in 2005. Exactly how much house prices have increased is hard to tell, as Turkey publishes no official house price statistics, nor do any private organizations of realtors publish statistics !!

Therefore, Turkey is relatively ill-served by international realtors…….(can you where the potential lies? :)

So, the international market seems to be climbing in abated………but what about the domestic market?

Domestic housing loans have risen from 2% of GDP two years ago, to 14.4% of GDP by end-December 2006.The engine behind the increased borrowing was a significant decline in interest rates until mid-2006 (when an upward blip in inflation caused a rate tightening).
If you don’t believe me about interest rates, have a look yourself……

So, now that we have found that buying in Turkey is viable, let’s look at the particulars……..namely the Buyer’s Guide and what it involves:

1) Foreigner Restriction to buying Property?

Foreign ownership in Turkey is ruled by the reciprocity principle.

Citizens of countries that allow Turkish citizens or legal entities to own property in their country are allowed to acquire property in Turkey. Citizens of most EU countries (except for Belgium, Cyprus, Czech Republic and Slovakia), the United States, Canada and other countries in Asia, Latin America and Africa can freely purchase properties in Turkey.

On 07 January 2006, a new law was enacted which put a limit to the amount of land that a foreigner can purchase. Foreigners are allowed to acquire a maximum of 30 hectares (74 acres) of real estate. Any piece of land exceeding 30 hectares requires a permit from the Turkish authorities.

2) Rental Yields steady?

Gross yields in Turkey are moderate to high. Properties in central Istanbul offer yields of 6% to 7.6%, while property in coastal areas can yield 13% to 16% (but rents in coastal areas are predominantly seasonal).

Property yields in the suburbs are generally more attractive than in the cities. While apartments in Istanbul yielded around 6% to 7.5% at end-2005, Ankara apartments yielded from 7% to 9.5%.

Houses in the suburbs of Istanbul yielded around 6.5% to 8.5%, while house in the suburbs of Ankara, could yield 12%.

3) Is Turkish Law Pro-Landlord or Pro-Tenant?

Rents may be freely agreed at the beginning of rental contracts between Tenants and Landlords.

The lessor is required to inform the lessee at least one month before expiration of the lease of the amount of rent he wants for the new rental period. If the lessee does not agree to this amount, the lessor may request an assessment of the rental value of the property by applying to a court. The court will take into account the report of an expert as to the amount of rent appropriate for the property in question, taking into account prevailing market rents.

There is no other form of rent control in Turkey.

Apart from there being no rent control, the Turkish legal system generally favours tenants.

4) How much tax will I pay on my Property?

An example of what a Non-Resident would pay:

Non-resident couple's joint monthly rental income:

Tax Example: €6,000

Annual Rental Income 72,000

Less Exemption Amount (2,094)

Less Standard Costs (25%) (17,476.50)

= Tax Income 52,429.50

Income Tax Rates:

YTL6,600 – YTL15,000 ( 20%) 691

TL15,000 - YTL30,000 (25%) 1,099

YTL30,000 – YTL78,000 (30%) 2,356

YTL30,000 – YTL78,000 (35%) 3,678

Over YTL78,000 (40%) -

Annual Income Tax Due €15,648

Tax Due as % of Gross Income 21.7%

Conclusion

Now that Turkey is at the crossroads, between EU accession or not, the savvy investor should have a look at the calculated risk of investing in an economy where East meets West.

Are you such an investor?

Running against the Wind......all the way to the End.

I'm currently enjoying the sunshine in South Africa on our family farm in the Western Cape.

And although the 'holiday' is for 5 weeks, the majority of my time will be spent with all over South Africa with Lawyers, Rental Agents, Property Developers, etc. in order to improve http://www.horizon-consultancy.com/ as a whole.

But progress has been unexpectantly slow due to a number of 'speedbumbs' that I have encountered while furthering the cause..................from seriously slow internet connections to incompetent Agents / Lawyers / Developers, etc.

When I started my property adventure 5 years ago, I thought I had laid the groundwork which would exempt me and my clients, from future dealings with incompetence and the inability to provide the client with the best possible service. But I have been sadly mistaken...................even though I currently have a great team of professionals assisting me, and my clients I still find you should ALWAYS keep your finger on the button. I think Albert Ellis said it the best when he said:

The best years of your life are the ones in which you decide your problems are your own. You don't blame them on your mother, the ecology, or the President. You realize that you control your own destiny.

While jogging this morning, I had my i-Pod in and the song 'Against the Wind' by 'Bob Seger and the Silver Bullet Band' came on. For those who don't know the song, these are the lyrics of the chorus:

- Against the wind

- I'm still runnin' against the wind

- I'm older now but still runnin' against the wind

- Well I'm older now and still runnin'

- Against the windAgainst the wind

- Against the wind

I guess Bob Seger and his mates might have been unto something when they reminded us that although things are hard in the beginning, you will always have to work at something in order to achieve...................in the beginning, as well as at the end.

Behind every Great Man......lies a Greater Woman

I’ve recently discovered a TV program which airs in the UK, and is called Dragon’s Den.

The premise is that ‘Budding Entrepreneurs’ pitch their product or invention, to a panel of 5 already established and very successful Entrepreneurs, in order to raise capital for their respective product. The established Entrepreneurs then have to decide if they will invest their own money in the product, by posing various questions to the inventor thereof.

After posing their respective questions, they then must state if they are ‘IN’ or ‘OUT’. If they are ‘OUT’, then the decision is passed onto the next Entrepreneur. If by the end, none of the Entrepreneurs decide to invest, then the Inventor will of course not get his investment. But, if the Entrepreneurs are IN, they will then ‘haggle’ with the investor on what percentage of the company they want, for the capital amount invested. They can also haggle with any of the 5 other Entrepreneurs if they are also interested in the product in question.

Now, although the program in itself is most certainly fascinating, I decided to do some research on the 5 panel already established Entrepreneurs, and how they got to where they are today? The person who in my opinion is the most impressive of the 5 panelists, is a guy called Duncan Bannatyne.

Duncan Bannatyne was raised in the town of Clydebank, Scotland from a relatively poor family.

In 1963, at the of fifteen (yes, you were still allowed to do this at such a young age in those days :) , Duncan volunteered for eleven years with the Royal Navy as a junior 2nd class engineering mechanic (stoker) at the boys' training establishment HMS Ganges, Ipswich.

He served several years before receiving a dishonourable discharge (wait till you hear why!!) for disobedience and attempting to throw an officer off a boat landing jetty in Scotland - an offence punishable by hanging in a previous century!!! After the incident, he had to serve 9 months in a military detention centre before being discharged. Duncan was only nineteen years old at the time.

After spending his twenties moving from one job to another (can you see the Entrepreneur being born?), Duncan lived for a few years on the island of Jersey. With a difficult business climate for outsiders in Jersey, at age 30, Duncan and his wife (he met het on Jersey) moved to Stockton-on-Tees in Northern England.

Bannatyne's business career began almost immediately with an ice cream van purchased for £450 (and this is where it all started………). He soon expanded by buying more vans and eventually sold the business for £28,000. He then founded a nursing home business instead which he sold for £46 million in 1996 and children's nursery chain for £22 million.

According to the Sunday Times Rich List, Duncan’s wealth is estimated at £200 million.

Now, when I look at someone who has come from no education, not in an environment to aspire to something better and no family connections (his Dad said to him that Bannatyne’s aren’t supposed to own their own business), I found myself asking the questions, How and Why??!!

The answer is quite simple really……..During Duncan’s time setting up his first major business success (the nursing home care business which he sold for £46m), he received a letter from a woman asking him the following: What do you do, when you have the aspirations to be a success, but your husband hinders your ascent to the top?

Duncan’s Answer: DUMP HIM !!! :)

Duncan goes on to say, that although he was a success almost instantly at the start of his career, he could never have done it without the support of his wife. He had credit card debts of around £50 000, he could not borrow any more from ANY bank so he had to sell any assets he had (which included his ice cream business as well as his own house!!) in order for the nursing home to be built. And throughout all of it, his wife stood behind him.......

If you are destined for SUCCESS, Have you got a Partner / Wife / Husband / Boyfriend / Girlfriend holding you back ????!!!

Property Review - The Bahamas

The Bahamas - The Country of 700 Islands.

F ast Facts:

• 3rd Wealthiest Country in the Western Hemisphere.
  
• No income taxes are payable either by residents or non-residents.
  
• Capital = Nassau
  
• Population = 323,000
  
• Currency = Dollar

Economic Overview

Has everyone got their Pina Coladas ready? Everyone got one of those small umbrellas? A piece of pineapple and maybe some nutmeg sprinkled on top for full affect? J Ok? Great !!!

Now, take your first sip and think 'The Bahamas ' .........and you suddenly see yourself whisked away to a turquoise sea teeming with sealife and sandy beaches that stretch for miles. You sit in your gorgeous Villa, while being served a seafood cocktail of shrimp & crayfish, while feeling the sun bronze your limbs......... So.....you wanna go?

Although, tourism is a major player in keeping the economy afloat, it is not the only thing going for this island paradise:

• No income taxes, capital gains taxes, or inheritance taxes are payable either by residents or non-residents.
  
• The tenant laws are pro-Landlord and only properties valued at less than B$25,000 are subject to the Rent Control Act.
  
• The Economic and Political Environment is stable and the GDP per capita is among the highest in the Caribbean.
  
• Seasonal Property Rental Yields top 10 to 12% per season.

So enough talk about facts, let's look at a few graphs on the Economy :

1. Looking at the GDP per capita, there has been an increase from the early 1990's when GDB growth was a steady 3%.
   
2. The only blight in this steady GDP per capita growth was in the early 1990's when inflation reached a high of just over 6%
   
3. But even high inflation could not keep the tourists away as seen in Tourist Arrivals below:

Inflation has had a steady downward spiral since 1990 and this has therefore fuelled the growth of GDP.

Even though the economy relies heavily on the US Economy to ensure growth, tourist arrivals figures have remained steady since the early 1990's.

Property Market Review

So, even though the Bahamas relies heavily on the US Economy to ensure their growth, the property market is still very much in favour of investors.......

Here's why:

Foreigner restriction to buying Property?

There are no restrictions on Foreigners buying property:

The only exception is a permit from the Government before the transaction, if the property is an undeveloped land and is greater than five acres.

Are Rental Yields steady?

Yields are around 5% to 6% for properties located in the coastal areas of Nassau and other islands.

Rental yields are good in the gated communities because there are many expatriate accountants and lawyers.

Properties with seasonal rates have yields of 12% to 15% as Grand Bahamas is so close to the US , many commute backwards and forwards.

Is the Bahamas Law, Pro-Landlord or Pro-Tenant?

The Landord and Tenant act of the Bahamas is Pro-Landlord:

Rents can be freely agreed for long-term & short term tenancies.

The landlord must give the tenant proper notice of rent due and possible eviction for defaulting on rent.

If the tenant fails to pay the rent on time, the landlord can summon the local police and repossess the property.

Even though a court order is not necessary for tenant eviction, most landlords bring defaulting tenants to court and sue for uncollected rent.

How much tax will I pay on my property?

No income taxes, capital gains taxes, or inheritance taxes are payable either by residents or non-residents.

The maximum Property tax is 2% for properties worth more than US$500,000 (GBP: 250,000 , ZAR: R3,500,000)

As an investor, the only 'restriction' that the Bahamas poses is the buying costs involved in the purchasing process:

Registration Fees: The buyer must pay several fees for the property to be registered. These fees are minimal and are not expected to exceed 0.5% of property value.

Stamp Duty: Stamp Duty must be paid upon delivery of the property. Stamp Duty is typically split between buyer and seller.

1. Up to 20,000
   2%
   
   
2. 20,000.01 – 50,000
   4%
   
   
3. 50,000.01 – 100,000
   6%
   
   
4. 100,000.01 – 250,000
   8%
   
   
5. Over 250,000
   10%

Legal Fees: Each party pays for their own lawyer. Legal fees are determined according to the property’s value:

1. First 500,000
   2.5%
   
2. Next 500,000
   2.0%
   
3. Next 4,000,000
   1.0%
   
4. Over 5,000,000
   0.5%

Real Estate Agent's Fee: The real estate agents’ fees are set by The Bahamas Real Estate Association. The fees are determined as follows:

1. Undeveloped/ vacant land in all islands except Grand Bahama
   10%
   
2. Improved residential properties in the Out Islands
   8%
   
3. All types of property in Grand Bahama
   15%
   
4. Improved residential properties (homes, condominiums) in all other islands including New Providence (location of Nassau) 6%

Conclusion

At a glance, you might see the Bahamas as an unobtainable paradise, only reserved for the Rich and Powerful. Exclusively frequented by celebrities to escape the limelight and for us mere mortals to merely watch and hope.......

But in actual fact, the Bahamas is a place that has all the elements that results in investors going cross eyed: no income tax, pro-landlord law & good rental yields :)

(Sources: www.globalpropertyguide.com , www.wikipedia.org Reuters, www.absa.co.za & Daily Telegraph)

Investment Opportunity - Johannesburg, South Africa

With the South African property market fast becoming a Buyer's Market, investors and potential homeowners should have a look at this wonderful New Build Property which is selling at a 35% Discount to the Market Rate:

The Property is within the secure Crescentwood Country Estate Midrand, Johannesburg:

• Cost: R1 650 000 ( Market value: R2 500 000) = equivalent £ 110 000 / € 150 000


• 'French Style' 3 bedroom, 2 bathroom (main bedroom is en-suite with walk-in Wardrobe)


• 'Provencal Gourmet' Styled Kitchen with entertainment lapa leading to pergola covered patio.


• Authentic French Styled shutters with under-floor heating throughout the property.


• Exquisite ' French Garden ' with computerized irrigation system & Swimming Pool.


• Water Feature at entrance and amenities within the Estate Club House.

Now that we have looked at the Facts, let's look at how the Numbers add up:
Mortgage (10% deposit - R165,000 to secure Property) = R 1 485 000
Mortgage Payment per month = R 16 697 (12.5% interest rate over 20 years)
Rental Potential (as ascertained by Estate Agent) = R12500 - R15 000
Let us assume an average of R13 750 as Rent per month (average of R12 500 & R15 000)
Therefore, Mortgage Payment subtract Rent = Shortfall per month.
R16 697 - R13 750 = R2 947 (equivalent £ 245 / € 290 per month) !!!
















At just R2 947 (£ 245 / € 290) shortfall per month (NOTE: At an Average Rental Assumption) we are looking at an Incredible Investment combined with unrivaled luxury of a 'French Townhouse'.

This Investment will expire at the beginning of December 2007 and therefore it is imperative that Investors inform us of their interest to buy, so that we can arrange a viewing.

If you have any queries or require more information, please let us know.

Property Review - South Africa

South Africa - The Rainbow Nation

Fast Facts:

- Africa 's Biggest Economy.
- The World's largest producer and exporter of Gold & Platinum.
- Capital = Pretoria
- Population = 47 million
- Currency = Rand

Economic Review

If you're a Private Investor sitting in New York / London, and you want to look at the 'possibility' of investing in Africa, where would you start? (I say possibility, because many people still see Africa as a basket case, and even the thought of investing there would warrant you a trip to the hospital and getting intimate with a straight jacket !!)

Normally, you would make a list of all the countries in Africa, and start from top to bottom.........but in the case of Africa, you would have start from bottom to top :)

South Africa (yes, the country and NOT the region) has since 1994 flourished under majority rule and is set to capitalise on this momentum for future generations.

Here's why:

1. South Africa is ranked 24th in the World in terms of GDP , corrected for purchasing power parity.
2. The Johannesburg Stock Exchange (JSE) ranks among the top 20 in the World.
3. The South African Rand (ZAR) is the World's most actively-traded emerging market currency, and was the best-performing currency against the United States Dollar (USD) between 2002 and 2005.
4. South Africa is also Africa's largest Energy Producer and Consumer.

So enough with the 'Colouring in the pretty Pictures and forgetting about the Reality' bit........let's get on with the hard facts, as Africa isn't called 'The Dark Continent' for nothing:

1. South Africa has one of the highest rates of income inequality in the world.
2. Unemployment sits at approximately 25%.
3. The Crime Rate is one of the Highest in the World, but it is the increase of violent crime that is the biggest worry.
4. With the crumbling of the Zimbabwean economy, refugees are streaming into South Africa with an estimated 2 million Zimbabweans already residing in South Africa.

So you may say, 'Please STOP' !!! With these statistics why would anyone in their right mind even have the notion of even looking at South Africa as an 'Investment Hotspot'???

I'll tell you why, and I promise to make it short........but Sweet :

1. The emergence of a black middle-class known as 'Black Diamonds'.

2. The 2010 Soccer World Cup.

3. The ratio of Disposable Income to Household Debt which is still only at 76%.

4. 93% of Land Claims have been completed.

5. Interest Rates are still at 25 year lows from a height of 25% in 1998.

Without trying to illustrate every point made above, I have focused on the correlation between interest rates and inflation below. And without further ado, let the pictures to the talking............ :)

Tito Mboweni (The South African Reserve Bank Governor) implements a monetary policy within an inflation targeting framework.......so what do these fancy words mean??? :

• In 'Layman's Terms - If inflation goes up, then interest rates go up.
  
• If inflation goes down, then interest rates go down.

So, to illustrate this, have a look at what the graphs tell us below:

So how do these graphs above explain the growth experienced in the Property Market?

• - If inflation goes up, interest rates go up and house price growth slows.
  
  
• - If inflation goes down, interest rates go down and house price growth increases.

Property Market Review

So, as mentioned in the Economic Review, there are 5 major factors that make South Africa a great place for property investment..........but what exactly are these 5 factors and how will they affect the Property Market??

Let's discuss these them one by one:

1. 'Black Diamonds' - An emerging black middle-class

- Of the 28,8m adult South African population, 21,9m are of black origin:

• Of those, 2m fall into the category called "Black Diamonds" - Black Diamonds are a group characterised by a certain amount of wealth, education and other middle-class determining factors.
• Black diamonds make up 10 percent of black South Africans, but are responsible for 43 % of black consumer buying power, amounting to a value of approximately R130-billion.
• Their growth has been recorded at 30% over the space of the last year.

2. 2010 Soccer World Cup (SWC) - The Biggest Event in the World

- Estimated 450 000 soccer fans are expected to visit South Africa for the SWC .

• These fans will spend in excess of R30 billion while enjoying the tournament.
• This 'cash injection' will push the economic growth rate up to 6%.
• 150 000 jobs will be created during the tournament.
• R5 billion for spending on stadiums (Renovate existing and New-built)
• R24 billion spending on Gautrain linking Pretoria , Johannesburg and OR Tambo International Airport.

3. 'The Ratio' - Disposable Income to Household Debt

Disposable income is the amount that you're left with after all taxes have been paid.

Household Debt is things such as mortgage / vehicle finance payments, credit cards and Loans.

1. South Africa 's disposable income to household debt is 76%.
   
2. So for every R1 that you make after taxes have been paid, you have to pay 76c toward payments and you are therefore left with 24c.

Now you think, WOW, 'For every R1 I earn I have to fork out 76c before I can start saving'??? (that's if you're the saving type :) That's rediculously high !! So, let's compare it to some other countries:

- Germany = 115%

- Japan = 140%

- UK = 142%

- Australia = 171% !!

As you can see, South Africa 's ratio pales in comparison to other countries around the World !!

4. 'The Zimbabwe Scenario' - To take or not to grab the Land

- 97% of South African land claims have been settled, thereby leaving the issue of 'Zimbabwe Land Grabs', becoming a reality in South Africa, as very unlikely.

5. 'The Interest Rate' - Currently at a 25 year low

• From a record interest rate of 25% in 1998, South Africa is experiencing 25 year low interest rates.
  
• The current Repo Rate (the rate at which the SA Reserve Bank loans money to Commercial banks) is currently at 10% while the Prime Rate (the rate at which Commercial Banks loan to the public) is at 13.5%
  
• With inflation being kept in the monetary policy range of 3-6%, any significant increases seem unlikely.

Just to give yourself a little bit of time to digest all the 'heavy' information above, let's look at some pictures !!

Look at the House Prices to Income graph below:

As you can see, compared to the UK , Australia and USA, South Africa's house prices are still very much under-valued.

• And coming from such a low base regarding property growth, is this where the party ends !! To quote the song from BTO.........'You aint seen nothing yet' :)

Conclusion

As South Africa moves into almost 15 years after the end of 'Apartheid', there are signs that the 'Lighthouse of Africa' still had a far way to go in order to be competitive on the world stage.

But with onset of a new era, with the new black-middle class, 2010 Soccer World Cup, comparatively low Disposable Income-Household Debt ratio, the 'Zimbabwe non-issue' and low interest rates at 25 year lows.........things are definitely on the up for the 'Rainbow Nation'.

(Sources: http://www.globalpropertyguide.com/ , http://www.wikipedia.org/ Reuters, http://www.absa.co.za/ & Daily Telegraph)

How free do you want to Be ?!

I had a very interesting discussion on one of the forums that I frequent called ‘Business Warriors’. The forum is a group of small business owners who call themselves ‘Warriors’ and is lead by the very charismatic, Peter Carruthers.

To give you a little background on Peter:

• In 1992 he closed a very successful data communications business.
• At least it was successful until his bankers decided to get out of lending money to technology firms :(
• And this happened while the South African economy collapsed during massive political upheaval !!!

The ‘crux’ of Business Warriors (BW) is that ideas are shared between business owners who have experienced all aspects of owning a business. What to do?, What not to do?, and what to do when the cr@p hits the fan !!

I would seriously recommend anyone who has / or who is thinking of owning a business to join the community. I’ve learnt a hell of a lot from it, and I’m 100% sure that I will continue learning :)

(Just click on the link, and take it from there:

So let’s get back to the interesting discussion that I was talking about before I got sidetracked by educating you on what BW was all about. I posted a message asking the members to let me know what their thoughts were on the following question:

How long did it take for you to be Financially Free?? (if that is the case)

Dear MembersAs a BW, I have only recently decided to start my own business (in SA as well as in London). Although we always go into a venture with the highest hopes of success, PC (Peter Carruthers) can contribute (as can many BW's ) that the chances of longevity are stacked against us.

Now, for those BW's who have had the success in building their own company, may I be so bold as to ask 3 simple questions:

1) How long have you had your business(s) ?

2) How long did it take for you become financially free with this business(s) ?

3) If you can sum up some advice in a few words to a starting BW, what would it be ?

Thanks a lotDomsie (this is my forum name :)

Now, as you can see, this is quite a personal question…………….. but I only realised my mistake after I posted the message !! And so I thought to myself, that I would be really impressed if anyone even attempted to answer this question…….

But lo and behold, I got a response !!!!……….and then another………and then another…….and by this stage I have had 22 responses which is seriously incredible !! To be fair, I was almost more impressed with the amount to replies than the content in those replies……………but that’s only until I read a few of the replies J WOW !!!

To put the replies in a nutshell, it came down to a theory called ‘Maslows Hierachy of Needs’ which states the following steps to self actualisation or self fulfilment:

Step 1: Physiological Needs (food, water, shelter)

Step 2: Safety Needs (Personal security from crime)

Step 3: Social Needs (family, friends)

Step 4: Esteem Needs (confidence, achievement, respect of others)

Step 5: Self Actualisation (self actualisation / financial freedom / self fulfilment)

Note that this is a very subjective theory, and that anyone’s idea of self actualisation is different to another.

It does also remind me of the following adage: ‘The difference between the Rich Man and the Poor Man, is that the Poor Man only ever thinks of his next meal, while the Rich Man, only thinks of his last’

When I was in the Caribbean on holiday this year, I was accompanied with 7 other mates, mostly from Johannesburg, South Africa. Now between the 7 of us, there were Chartered Accountants, Property Developers, Business Owners, etc. and as you might think, at some stage of the holiday the conversation turned to money. Now it wasn’t a conversation on who has the most or who can be the most flash.

The conversation was about ‘How money can change a person’………..for the better, or for the worse :(

The very interesting conclusion to that conversation was this: 'You could be a Billionaire, or you can be a pauper. But if you could still have a good time with the people who you love and care for (no matter the size of your wallet), then you were rich beyond your wildest dreams......'