REIM Offshore Guide 2013 by Combustion Publishing

THE ULTIMATE PROPERTY INVESTMENT

GUIDEBOOK

2013 EDITION 5

R 100 (Incl VAT) Brought to you by:

The iconic WesbankFairland development

Joburg Property Company

turns 13 in 2013

As an agent of the City of Johannesburg (CoJ) Metropolitan Municipality, JPC is contributing to the objectives of the Growth and Development Strategy articulated by the Mayor and by utilising council-owned land assets to leverage private sector investment in public infrastructure. The City of Joburg Property Company (JPC) services include: • Management of council property portfolio • Selling and buying of property • Facilities management • Property planning and advise • Property management • Property development and facilitation • Property maintenance • Property register maintenance • Letting/leasing of council property portfolio, including • Outdoor advertising • Servitudes, encroachments and access rights control JPC Objectives The JPC objectives are to harness the City’s property portfolio transactions to increase economic growth and Broad-Based Black Economic Empowerment (BBBEE), while creating jobs and economic opportunities for the disadvantaged communities and businesses. JPC does not use agents or brokers when leasing or selling property as legal requirements directs for an open tender system that allows all interested parties an opportunity to participate in the economic development of the World Class African City.

JPC Background The Joburg Property Company was established in 2000 and as the only mandated agency of the City of Johannesburg to manage and develop land and property on behalf of the City. It currently manages a property portfolio worth over R8, 8 billion with 64 000 properties covering at least 39 000 hectares. Since the 1st of November 2012, JPC has merged with the Facilities Management Unit and Metro Trading Company, in effort to consolidate key functionalities in providing excellent service delivery to our stakeholders Achievements Since its inception JPC has been responsible for iconic developments such as the Orlando Towers in Soweto, Soweto Theatre, the Newtown development, Huddle Park Golf Course in Linksfield and most recently the Jabulani Precinct in the Jabulani CBD in Soweto. Key projects The Land Regularisation Programme is the first of its kind in City history and unique to any majorCity in South Africa where the long term/leaseholders of property are given title to their homesand business places that were council owned.

The award-winning Soweto Theatre in Jabulani

“The Land Regularisation Programme is unique to the City of Johannesburg, forming the basis of a sustainable property economy through expediting the transfer of properties to beneficiaries, as well as releasing vacant sites on public tender,” says Ms Helen Botes, Managing Director of JPC. “Over the next three to five years, the program seeks to transfer and/or release approximately 3700 properties in Alexandra, the Greater Soweto Area, the Greater Orange Farm Area, Ivory Park and surrounds.” Property Incubation The programme is aimed at transforming the property industry through accelerating the entrants of new players, especially SMME’s and BEE companies. JPC will identify, allocate and make ready for development a number of commercial properties that will be used to fast track the entrants of SMME’s and BEE in acquiring and sustaining property. Other key projects • Property Academy • Property Bulletin • Rissik Street Post Office • Newtown Potato shed • Orlando ekhaya • Holocaust museum

Redefining the Sandton skyline The Kgoro Sandton development

Tel: 010 219 9000 Email: clientservicingunit@jhbproperty.co.za Website: www.jhbproperty.co.za

CONTENTS FEATURES

6 Buying Property

14 Getting Started

22 The Quick Fire Guide

44 Botswana

60 If You Want Better

62 Protect Your Assets

4 Note From The Sponsor

14 Getting Started

5 Investor Talk

22 The Quick Fire Guide

6 Buying Property In A Foreign Country

26 Investing In

Scott Picken

Spread your risk with offshore investment

The due diligence list

8 World Housing Market Where are the opportunities?

10 Take The Plunge

In the USA

To investing in London

New Zealand

30 Earn An Income In Australia

34 Before You Buy

Consider your long-term plans

And invest in offshore property

12 Global Listed Property Maximising your money

37 Forging Ahead

With prosperity in Cyprus

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Offshore Handbook 2013

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THE TEAM

44 Botswana

Publisher - Neale Petersen | Editor - Angelique Redmond

Demand is high

Designers - James Clark & Amy Little | Office Assistant - Melissa Petersen

46 Residential Development In Kenya

Traffic - Juanita Heilbron | Financial Manager - Marisa George Web Administrator - Russell Bennett | Sales Manager - Roy Lategan Sales Executives - Andre Evens, Renier Lombard, Alex Masamuna,

48 Retail Hits The Mark

Marc Oppel & Themba Mateza

In Ghana

50 Living The Life In Seychelles

51 New Economic Gains In Zambia

54 Where Are The Property Markets In Zimbabwe?

56 Meet Mauritius

Embrace the island style

60 If You Want Better Than Your Bank Don’t use your bank

62 Protect Your Assets

Know the law before you invest

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Offshore Handbook 2013

NOTE FROM THE SPONSOR the entire journey until the property is ready for Handover to the particular Managing Agents.

nternational Propert y Solutions (IPS) and Wealth Migrate are really proud to be sponsoring the REIM 2013 Offshore Handbook. We truly believe to be sucessful in International Property you need the right partners and the right information. We believe that Real Estate Investor Magazine is the leader in South Africa at providing people with the right information and we wanted to sponsor the handbook so that we could show people how to chose the right partners. IPS provides an all inclusive Private Banking Solution to offshore investment, essentially doing only 2 things, educating you so that you have the knowledge to make educated and informed decisions about your future and then providing you with solutions. Over 80% of people who invest overseas actually lose money, however with our experience of assisting over 2000 people invest internationally - to a value of R1.6 billion - we can ensure that you invest with confidence and ultimately create wealth preservation, a Plan B and peace of mind.

It is far more than just international property investment... We understand your needs and then help you design a bespoke solution to achieve your long term investment goals. We then help you implement that plan by choosing an investment destination, the right property, arranging the finance and fulfilling all legal obligations, in addition to managing the International Purchase Process throughout 4

Offshore Handbook 2013

We take pride in our strategic affiliations with our Best of Breed Partners who specialise in international investment in each country (Australia, the UK and USA); and our highly professional, dynamic and knowledgeable Team. Principally, IPS only does two things: we educate sophisticated and intelligent investors about their future; and then we provide them with the solutions! It’s by means of this strategy that we help you create wealth through property – and preserve wealth through international property – and build a better life for you and your family in perpetuity! The Wealth Migrate mission is to provide a global, self service, crowd funding property solution, which takes advantage of local property markets, through best of breed partners and collective buying power. This will be optimised by a Global IT Platform, providing transparency and efficiency of property markets!

Bottom line is the world is global and South African’s need to be seaking the best returns and investments globally. We are sure you will enjoy this handbook and good luck taking advantage of the great opportunities which present themselves in international property markets. Thanks Scott Picken FOUNDER AND CHAIRMAN OF IPS AND CEO OF WEALTH MIGRATE

For more information go to www.wealthmigrate.com www.ipsinvest.com www.reimag.co.za

INVESTOR TALK

Spread Your Risk With Offshore Investment

elcome to the 2013 Offshore Handbook. In this Handbook you will find all the information you need to start your investment journey in another country. You might be asking, why you should think of investing in another country? The answer is simple, not only is it the smart decision from an investment point of view, but by diversifying your assets you are essentially spreading your risk. After all having all your eggs in one basket is pretty risky. With the technological age we now live in, investing in another country has never been easier. You have all the information you could need to make an informed decision at your fingertips, and with Google Earth, you can even view the landscape from the comfort of your own home. Before you decide which country you want to invest in, it’s best to start at the beginning and consider what type of investment you want? Are you investing for returns? Or do you want a holiday home that doubles as an investment? Or a retirement home whch you can let out now and earn money from?

Globally the property market has been on a bit of a rollercoaster ride, but things seems to have stabilised and there is definite recovery on the cards, and as the economies recover so too will the property markets. One can see this in the USA which not only survived their economic crisis but saw property in the USA becoming sought after as people picked up bargain deals knowing that once the market had hit rock bottom the only place left to go was up. The Organisation for Economic Co-operation and Development (OECD) has predicted that GDP worldwide growth in 2013 is expected to match that of 2012 at 1.4%, before increasing to 2.3% for 2014. With that in mind, I wish you happy reading and researching as you start your offshore investment journey! Angelique Redmond EDITOR

“Risk comes from not knowing what you’re doing”. Warren Buffet www.reimag.co.za

Offshore Handbook 2013

GETTING STARTED

BY ANGIE REDMOND

Buying Property In A Foreign Country The due diligence list

tenants, as these will play a large part in making sure the home is not only a good investment, but will also suit your tenant’s and your needs.

uying a home, whether as a f irst-time home buyer or an experienced property investor, comes with many important considerations. In addition to the financial aspects and taking into account your affordability, bond applications and negotiating an Offer to Purchase, there are many useful guidelines that can make the offshore house hunting process a simpler and smoother experience. Create a list of criteria To begin the process, identify your requirements by creating a list of “must haves” and “nice to haves”. This allows you to compare properties that you view more objectively. T horough ly resea rch t he count r y you a re interested in to ensure that it offers investment growth opportunities. Consider your needs in terms of renting your house to a tenant, things such as proximity to schools, work, public transport, shops and other amenities that are important to 6

Offshore Handbook 2013

Deciding on the physical features such as size and number of bedrooms may seem simple, but it is wise to bear in mind that buying property is a long-term investment. Therefore, anticipating your needs over the next 5-10 years will make it a more valuable asset and ensure that you don’t find yourself in a position of needing to sell too soon. Decide which property type suits you There are different types of homes, such as freehold properties or sectional titles, and deciding whether you have a preference for one specific type over another will simplify your house hunting experience further. While freehold houses offer freedom regarding alterations or renovations, sectional title properties offer security and convenience with maintenance. Also keep in mind that there are additional monthly payments on sectional title properties in the form of levies. As with the required features of a home, the decision regarding which property type suits you will depend largely on your needs and your tenant’s needs, both now and in the future. The online search With this information to hand and the ease of access to information which online technology offers, searching www.reimag.co.za

for property has become a far simpler process. There are many factors to consider when looking at global opportunities in the housing market, and these are detailed below.

The price of the property: The price of the property needs to be considered with the exchange rate in mind. You could opt to take out an overseas mortgage through a specialist broker. They can give you information. Specialist brokers may have links with estate agents or lawyers in your chosen country. Since the credit crunch, it has become more difficult to obtain finance in some countries. Lending criteria and the maximum amount you can borrow as a proportion of the property’s value (loan- to-value) have been tightened up in many places, and you will need to supply detailed documentation to prove you can afford it. Costs involved: You will also need to budget for buying costs, such as mortgage and lawyers’ fees, taxes and insurance. Estimate this as a percentage of the purchase price – around 10% in France and Portugal, 12% in Spain, 15% in Italy and 5% in the US. Be careful when using money transfer services as not all firms put client money into a ring-fenced account to protect it in case they go bust.

What to pay when: Once you’ve found a property you like and agreed a price, you’ll need to pay a nonrefundable deposit of at least 10% of the purchase price in some countries, the deposit will vary dependant on the country you purchase in. In some countries, including Italy and Portugal, you may need to hand over up to a third of the total price upfront. Don’t hand over any money before you’ve negotiated an initial contract, and then only to a lawyer or bonded estate agent. The legal aspects: Seek advice from an independent solicitor, well-versed in the property laws of the chosen country and from an independent financial advisor, before deciding on an overseas property investment. www.reimag.co.za

Agents and developers may often offer the services of their own legal representative, however, be careful of

accepting such an offer as it may not be objective due to conflict of interest. Property ownership laws differ in each country and you need to know whether the laws in the country you want to invest in restrict or discourage foreign ownership. Taxes: In addition, as a property owner overseas, you can enjoy tax benefits in the country where you’ve invested. Many countries impose very low, even negligible, property taxes or no property taxes at all. This can be a big plus for a foreign property owner, just make sure you know and are familiar with what will be expected of you in terms of taxes, before you purchase a property. Type of investment: What type of investemt are you looking for? A year-round basis or holiday accommodation in a tourist hotspot? The type of investment you are looking for in terms of use will have a large impact on where you decide to invest. Price and rises: Two factors that should weigh

heavily on the decision are the current price and the scope of the price rise, as this inf luences the resale value, and in turn any profit you stand to make. So have a look at the current price and how property prices in that country have risen over the last seven years, this will give you and idea of what sort of the price growth trend, taking into account any anomalies, for example if the property market experienced a crisis, in which case the data may be skewed and not present an acurate reflection of the growth you can expect. Once you have all the information at your fingertips you will have a better idea of where the investment opportunities can be found and you can narrow your list down, and with the Internet, searching for information is easier than ever, just make sure the websites you use are reputable. Offshore Handbook 2013

GLOBAL MARKET

BY ANGIE REDMOND

World Housing Market Where are the opportunities?

ith globalisation on the rise and the steady increase in population, people a re becoming more interested in buying property not just in their own country but also in other cities around the globe. There are many factors to consider when looking at global opportunities in the housing market, factors such as the price of the property, costs involved, the legal aspects, property ownership laws, taxes and whether you are acquiring the investment as a year-round basis or as holiday accommodation in a tourist hotspot. Two factors that should weigh heavily on the decision are the current price and the scope of the price rise, as this influences the resale value and, in turn, any profit you stand to make on it. 8

Offshore Handbook 2013

What is the general state of the global market? Cer ta in housing ma rkets such as t he U K , China, US and Australia promise stability and even improvement, while others are more risky investments, as the markets are not as stable. European countries have been hard hit by the recession, unemployment and tight credit and while they should not be ruled out entirely, they have a higher risk factor associated with them. The UK, Sweden and Switzerland continue to be strong and promising for the near future. In North America, Canada is going through a soft period, while the US is a fast growing hotspot for property investment. Both Columbia and Chile have shown steady price increases in 2012. Looking towards Asia, China is the leading destination for buying property. India, www.reimag.co.za

Indonesia and Australia remain steady, with Thailand and Korea a bit behind. Housing market prices vary from city to city for a plethora of reasons. Brazil, for example, is set to be a leading global tourist destination in both 2014 and 2016, with both the Soccer World Cup and the next Olympic Games to be held there. You still need to do homework and your own research before working out where you want to buy property, and while past trends are a good indicator of what to expect, as they say, nothing is certain. There are certain cities which stand out as top global destinations to invest in. Lets take a look at a few of these. Top global cities London: With a rise of 2.2 per cent in the first three months of 2013 and an annual growth of 4.7 per cent, England’s capital is among the top cities for property investment. New York: This is one of the top business capitals of the world and as such is worth taking a look at, despite

escalating rises in land and rent rates, housing is 4 per cent overvalued owing to rents and 2 per cent owing to incomes. Hong Kong: Prices have increased to more than double since the financial crisis of 2008 and the apartments here are the world’s most expensive, with office property coming in at second most expensive in the world. Limited land makes property a commodity and one that is set to remain a good investment. Paris: More than just the city of love, Paris is one of the world’s top tourist destinations and as such accommodation will always be a worthwhile investment here. San Francisco: Low mortgages and extremely low levels of inventory have resulted in huge price rises and www.reimag.co.za

demand in the city renowned for its cool summers, fog, steep rolling hills and landmarks including

the Golden Gate Bridge, former Alcatraz Federal Penitentiary. It’s also a primary banking and finance centre. Cote d’Azur: The name conjures images of opulence and wealth and for good reason; this coastline off the Southeast corner of France became popular as a winter resort for the British upper class in the 18th Century. Frequented by artists, writers, royalty and celebrities, the housing market price is growing daily and that makes this a destination to invest in. Toronto: If you are a professional buyer then investing in semi-detached houses in the provincial capital of Ontario is a smart move, if you prefer to play it safe you might find this market a bit tricky right now. Dallas: Single-family home prices rose by over 7 per cent over the past year, and with supply and interest rates low, this growing city is a good option. Los Angeles: Also known as the city of angels due

to its original Spanish name, El Pueblo de la Reina de Los Angeles or ‘ the town of the Queen of Angels’, and home to both Hollywood and Disneyland. Miami: Best known for its beaches and its port, which is considered the ‘cruise capital of the world’, it boasts natural beauty, tourists and commercial aspects making it a good investment option. Regardless of where you decide to invest, it all comes down to the numbers mentioned in the first paragraph and of course your personal taste and what you want to do with the property, so wherever you decide to invest, make sure you do your due diligence first!

RESOURCES Global Property Guide Offshore Handbook 2013

GETTING STARTED

BY ANGIE REDMOND

Take The Plunge And invest in offshore property

nvesting in real estate in another country is the smartest thing you can do with your money right now. Thanks to the global market events of the past, many options exist right now for you to buy and make money in an offshore property market. And with the age of the Internet, seizing these opportunities has never been easier! So why, you may ask, should you invest in offshore property? Here are just some of the many reasons. Like real estate anywhere, offshore real estate is a hard asset, and in the current economic climate, hard assets are the most sensible investment class for storing value. Hard assets are investments with intrinsic value that are typically an excellent inflation hedge. As with real estate anywhere, you’re buying with the hope of capital appreciation, which is an increase in the price or value of assets. Overseas real estate offers your portfolio diversity,

Your property will double as a retirement plan and tomorrow’s retirement residence. Your property offers many uses, an investment for you and your family and a holiday home, when you feel the need to get away. The propert y you buy today can be left as a legac y for your children and their children, continuing to give your family a steady income even after you are not able to. You can buy, sell, rent or develop according to your needs and time schedule; you retain control of your investment. You c a n gener ate a c a sh f low i n a not her currency, and with the exchange rate, you could end up w ith an excel lent investment ret urn, depending on the exchange rate of the country. Real estate investing is fun. Your real estate

an important means of reducing your risk by investing in a variety of assets, giving you less risk than if you had an unvaried portfolio. Not only is your portfolio diversified but the market you are investing in is diversified, as is the type of asset.

investment can double as a persona l retreat, part-time residence, or vacation getaway. You can enjoy it while it’s appreciating in value… generating renta l ret urns…and safeg uarding your net worth.

By investing in overseas property you position yourself to profit from both expanding and crisis markets.

So what are you waiting for? Get started on your offshore property journey today!

Offshore Handbook 2013

www.reimag.co.za

GLOBAL LISTED

BY ANDREW CATTELL

Global Listed Property Maximising your money

n local currency terms, the performance of global listed real estate has been on par with that of the local listed real estate sector year-to-date. However, given the performance of the rand so far this year, global listed real estate has outperformed the local market in rand terms. On average, the yields of global listed real estate markets with REIT (Real Estate Investment Trust) or REIT-like characteristics (like the local sector) are trading 1.5% to 2% higher than their respective local bond markets. In South Africa, however, the listed real estate sector is trading at a marginally lower yield than the local 10-year bond yield. Therefore, in a world of potential global bond 12

Offshore Handbook 2013

yield expansion, opportunity may well still exist to invest in global listed real estate. W hen investing in rands there are various opportunities for South African investors to gain direct and indirect exposure to global listed real estate if the preferred entry point is to invest in the share market directly. These opportunities have different risk profiles with a broad range of investment angles, either offering income streams or development upside. Investors should therefore start by identifying what their investment needs are before deciding whether global real estate is an www.reimag.co.za

attractive opportunity and if being directly invested in the stock market is their preferred entry point. In uncertain economic times investors tend to revert to what they believe to be safe haven investments. Central London property, from residential to commercial, has benefited from its perceived safe haven status in the current uncertain economic times. Capital & Counties Properties (CapCo), listed both in London and Johannesburg, was and continues to be perfectly positioned to benefit through its £1.7 billlion investment portfolio in the Covent Garden precinct, Olympia Exhibition Centre and the potential mixed use development and regeneration at the Earls Court Exhibition Centre. For investors preferring exposure to shopping centres, CapCo’s pervious sister company, Intu Properties (formerly named Capital Shopping Centres), provides an easy entry point as it is also listed both in London and Johannesburg. Intu’s key attraction is its concentrated shopping centre portfolio consisting of 16 shopping centres across England, Wales and Scotland located within most of the major urban nodes in the UK. Although the United Kingdom seems to be a first stop for most South African investors, shopping centre exposure can also be gained in Romania via the locally listed New Europe Property Investments (Nepi). With most of its shareholder base also South African, Nepi provides exposure to mostly Romanian assets, many of which are retail, in a previously underser viced consumer market with growth potential. Also like Nepi, out of the stable of a major local listed real estate stock, is Redefine International. Redefine International has a collection of investments in UK retail, hotels and offices, German retail and Australian offices; thereby offering an investor exposure to a diversified asset base and risks spread accordingly. Smaller locally listed real estate stocks, and thereby limited liquidity, with offshore property exposure www.reimag.co.za

includes MAS and GoGlobal. Both of these counters are in the process of building up portfolios; MAS with a UK development angle, while GoGlobal has an initial German retail focus. MAS’s shareholders have created long-term value through South African real estate development, while GoGlobal should offer a defensive income stream, thereby both warranting a closer look as they gather momentum in creating critical mass.

A fr ica cou ld create at t ractive investment opportunities in the medium to long term. Besides South Africa, sub-Saharan Africa has underdeveloped commercial real estate markets with various multinational corporates and local and international retailers wanting to expand into these markets. At present it remains difficult for an individual investor to gain exposure to this opportunity as most of the capital still comes from institutional investors. On the local stock market direct and indirect exposure can however be obtained. Rockcastle is a Mauritian and South African listed real estate company that aims to have exposure to direct real estate in subSaharan Africa excluding South Africa and Nigeria.

At present most of the underlying investments are in global REITs and should start to partially migrate to direct real estate as opportunities to either develop or acquire are exploited. Indirect exposure to subSaharan real estate can be gained via local listed real estate players Resilient and Hyprop. Resilient has set up a joint venture to develop retail properties in Nigeria, which should start to come through in the next 18 to 24 months. In turn Hyprop has entered into a joint venture with local real estate developer Atterbury to build up a sub-Saharan direct real estate portfolio. Its first retail property investment has been made in Ghana with the immediate potential to develop further retail properties in that country.

RESOURCES Catalyst

Offshore Handbook 2013

USA

BY SCOTT PICKEN

Getting Started In the USA

nyone who invests in property needs to know what is happening in the USA. It is where the trouble started and it won’t necessarily be where it ends, but it is certainly having a major impact on the global property market, let alone the opportunity it presents. Scott Picken, IPS (International Property Solutions) and Wea lth Mig rate Founder & CEO, has travelled to USA five times in the last 12 months, investigating 14 different markets and investing millions of dollars. Scott says, “The one thing you have to understand is that it is a massive country and the property market is very regional! To try and understand, we met with many strategic partners 14

Offshore Handbook 2013

around the country including the likes of Wall Street Bankers, Dr Dolf De Roos (author of Real Estate Riches, part of the Rich Dad Poor Dad series, and leading international property expert) and a plethora of property people, lawyers, accountants, etc. Personally I always find I learn most from the ‘taxi drivers’ about what is happening in any city. At the end of the day we always invest with a cynical approach, trying to punch holes in arguments, trying to understand the risks, trying to evaluate and measure the opportunity, based on these risks!” With that in mind, let’s now understand what has happened in the world’s biggest economy – the USA – their economy and property market. www.reimag.co.za

against your name when you walk away from your property, the bank can’t come after you for your

What caused the crisis and where are we now? Before we can understand where the market is going, we need to understand what caused the chaos, so that we can make educated and informed decisions about the future. The two major issues, the subprime crisis and the oversupply of property are discussed below. The sub prime crisis a. It is all about the ‘reset mortgages’. What this means is the banks/ mortgage lenders were providing really cheap finance to people on 2, 3 and 5 year fixes. What mortgage brokers told people is that when they came to the end of their fixed period they would just remortgage again. However, as the market changed, they could not refinance, the mortgage rates often doubled if not tripled and then they could not afford their mortgage. b. Another problem is that in the USA all lending is ‘non-recourse lending’. Basically what this means is that although you will get a black mark www.reimag.co.za

other assets. Therefore, people, who find themselves in this negative equity position, find it easier to walk away from their mortgage than to continue trying to pay.

c. Ease of arranging finance: When I asked people how one got a mortgage before 2007 they said, “All you needed was a heartbeat!” This was the major problem – anyone was given mortgages and this is what caused the “subprime” crisis. The banks/mortgage lenders provided what was known as “NINJA” loans – “No income, no job, no assets”. When George Bush was re-elected in 2003, he said it should be every American’s right to own a home and encouraged banks to lend freely. As an example in Orlando we were told how the bank would approach lenders and ask them what they would want to pay monthly. They would normally be paying $2000 a month but would agree to pay $200 a month and put the rest on the end of the loan. Most people will always take the easy mortgage and that is why most Americans had 3 to 4 mortgages over their homes.

d. The question is: “Where do we go from here.” The scary thing is that there is another resurgence of reset mortgages (over $1 trillion) which is on the horizon for the Commercial Securitised Debt. Although government and banks are preparing for this and doing everything within their power to prevent the same catastrophe from recurring – it is still coming and it depends on how successful they are as to the type of damage it will do to the commercial market. Oversupply of property a. Oversupply: Unlike UK, Australia or South Africa where demand continued to out strip supply, in the USA there were and are major oversupply problems. The country got so caught up in the Offshore Handbook 2013

USA property boom that they just built – whether or not there was demand. In fact, in 2004 it was

believed that for every four houses built, one stood empty. 25% of properties were unoccupied and people didn’t care as they were just focusing on the capital growth. It is estimated that there are as many as 10 million properties in oversupply.

b. The important thing to understand is that for over five years there has been no supply whatsoever. The population continues to grow and so the demand and supply are coming back into equilibrium. c. The final thing to be aware of is the ‘Shadow Inventory’ where the banks are holding back repossessed inventory to ensure they don’t flood the market. One has to be very careful about this and do one’s research as this can be a major risk in certain markets. One needs to understand these challenges, but it is clear that things have changed, there is no more reckless lending (in fact, at the moment it is mainly cash-only purchases) and the supply and demand

graphs are back into equilibrium. In fact, in 2010, IPS decided, although there was opportunity, there was too much risk to invest (see the 2010 USA Property Report at www.ipsinvest.com), we now believe this is a market which investors need to understand and take advantage of. There are three reasons for this. Three reasons we are excited about the opportunity in USA The story When investing you always need to understand what is the story behind why you should invest. We believe that the US property at the moment offers a very compelling story for a number of reasons. The US economy You need to read the USA Property Report – 2010 16

Offshore Handbook 2013

to understand where the economy was in 2010, the unemployment, national debt, consumer spending,

etc. On the whole there were many parallels between the USA in 2010 and the USA in the Great Depression of 1929. Unemployment in the Great Depression was 25% and if you compare apples with apples, then unemployment in 2010 was 24.9%. The national debt rose to a position where the US technically went bankrupt on the f irst of August 2011, as their debt repayments exceeded 100% of their earnings. The only hope for repaying this debt is when the ‘Y-generation” reach an influential point in the economy (average age 35) and this will not happen till 2025. Finally 70% of the US economy is based on consumption and with the ‘baby-boomers’ hitting retirement (10 000 per day) this spending is decreasing. However, taking the negatives of 2010 and even the fact that many of the problems remain, American’s are much more positive that the economy is recovering. Employment numbers have recovered, the Dow Jones has gone above 15 000 and, most importantly, the economy is growing. It is certainly the leading developed economy at the moment and is leading the optimism in the markets at the moment. US property prices down 35% Since 2007, property prices across the US has dropped by 35%. Now we understand that these prices were extremely inf lated and that it also varies from area to area, with places like New York losing nothing and Las Vegas losing 70%, but it is interesting to understand if for nothing other than the physiological effect on the American people. Replacement values are 40%- 60% of cost price to rebuild 2007 prices were very inflated, however ,a far better measure of value is what it would it cost to replace the same property today and in most areas you are buying property for 40% to 60% of what it would www.reimag.co.za

USA cost to replace that same property. Along with the income yields which are possible, this provides a very

United States House Prices

$300, 000 $275, 000

compelling argument for intrinsic value in the property.

$250, 000 $225, 000

$75, 000 $50, 000

Bottom line: strong rental demand and great income yields. Property is a simple investment and it comes down to the supply and demand. As explained already, this was one of the underlying problems which caused the GFC and the over supply in the US. After five years and no supply, it is believed the supply and demand is coming back into equilibrium and in line with intrinsic value. Look at the long -term trends and how they are back in equilibrium. 18

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2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

Year

U.S House Prices vs. Owner-Equivalent Rent

225 200

House price index Owner-equivalent rent index

175 150 125 100 75 50 25

Year

After supply and demand, all propert y – be it

commercia l or residentia l – should be va lued

based on the income it can generate. The good news is that the US property values are back in line with the long- term trends. Property opportunities These graphs a l l tel l a stor y, but when Scot t

Picken asked Ian Fife, editor of the Financial Mail Property Section and very successful property investor, “How do you deal with uncertainty?” he

explained: “Through knowledge; by concentrating

on the actual realities of the market we operate in. An index is a theoretical figure. A transaction is concrete and specific. If you know how property

actually works, you’ ll know that it remains the

biggest store of wealth in the world for ordinary

people. That is so because it remains the most predictable and conservative of asset classes. And it is more often than not a home, too.”

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2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

0 1987

Bank lending – even if Americans can get over the psychological scarring and realise the opportunity, there is very limited bank funding and so prospective buyers can only buy cash. The average person does not have access to cash like this and so they are forced to rent.

1972

1970

$25, 000

Index

•

rent. More than 50% of Americans are now renters.

$125, 000

1983

Psychological scarring – 8 out of 10 Americans we met had had one of their properties repossessed in the last five years. Everyone from property investors to secretaries had gone through the pain of losing their property. Not only had their properties been repossessed, but the IRS (Internal Revenue Service) came after them, as the IRS deemed any write-offs the bank gave their clients as gift on which the lenders had to pay tax. Basically they have had enough of property and are quite happy to

$150, 000 $100, 000

Two factors underpinning strong rental demand •

$175, 000

1985

Property fundamentals The biggest lesson which was learnt from the Global Financial Crisis (GFC) was that those investors who invested for capital growth suffered losses – be it the biggest funds in the world or the individual ‘mom and pop’ investors - and those who invested for income have not only survived but thrived!

Price

$200, 000

Scott Picken bought his first home in London in

2002 at the age of 24 and used this same logic. At

the time the UK was going to war with Afghanistan

after 9/11 and everyone expected oil prices to go up, inflation to go up and eventually interest rates to go up. Scott, however, focussed on the fundamentals of the opportunity. It was a 3-bedroom house, 5 minutes from Wimbledon tube station and with a £20 000 investment he could renovate and turn the property into a 5-bedroom house. With this he would net over £1 000 a month and decided that if interest rates went up he would be able to ride the wave. Unfortunately for the doom mongers, it never happened. But in late 2008 the GFC came and Scott was very nervous about what would happen if all the tenants left. As it transpired, a good property in a good area, will sustain tenant demand. He might have lost £100 000 in capital value in the GFC (although the market has now recovered), but he doesn’t care as interest rates dropped to 0.5%. His passive income is more than £2 000 a month and so he will logically ride the wave until the market recovers. Basically it is all about the fundamentals of the deal or opportunity. The opportunity in the US at the moment is the same with replacement values at 40% to 60% and net yields ranging from 8% to 13%. The timing Although it is an incredible story, the next major component is timing. Sophisticated investors know that timing is very important to ensure investments generate the right returns, but they also understand that the only time you can ‘call’ the bottom of the market is in hindsight. Most investors focus on the crash (the graph on the right) and yet they should focus on the fundamentals of the market, the values based on income which can be generated. www.reimag.co.za

Price

Time

That being said, the market has def initely t urned. From the mainstream newspapers to Warren Buffett and Donald Trump, all are saying that the market has turned and now is the time to invest. During a recent interview, Donald Trump said, that now is a great time to get into real estate in the US – and he specifically pointed to houses as the best investment in the US property market. Fellow billionaire, Warren Buffett, appeared on CNBC in late February 2012 and essentially said the same thing. In fact, he said if there was an efficient way to do it, he’d like to buy 200 000 single family homes! “If held for a long period of time and purchased at low rates”, Buffett says “US houses are even better than stocks.” According to the Wall Street Journal more than 50% of Americans now believe that propert y prices will rise and that the worst is behind them. The Case Shiller Index is up over 10% across the whole country for the last 12 months. However, the most important thing which has changed the market is that Wall Street has moved onto Main Street. The hedge funds from Wall Street have now moved into buying US property and are really driving the demand, driving prices up and yields down. Funds like Colony Capital and Blackstone have deployed billions of dollars into residential property in the US. Atlanta continues to produce the best overall returns, Orlando has the best capital growth and Memphis is the best income market for returns. Offshore Handbook 2013

USA Our partners in these markets are world class and continue to impress our clients with their professionalism.

Scott says, “The interesting thing is that we have researched over 14 markets including Las Vegas, New York, Phoenix, San Diego, Chicago, Detroit, Orlando, Miami and Boston, to name a few. We have spent over R1.5 million on travelling to all these markets, but the greatest thing is that along with our partners, our research has stood up as the markets we are investing in are getting the best returns in the US, and continue to be the best performing markets in the whole country. This is the advantage of working with the company who has helped more people in South Africa invest internationally than any other company (over 2000 international investments to a value of over R1.6 billion) and also working with the best partners in the US.” Great opportunities going fast The partners The bottom line is you can do it on your own, or

you can work with tried and tested partners, work together and use the laws of nature. Do you know? Flocks of 25 birds can fly 70% further than a bird on it’s own. In 2010, Scott met with a number of partners, including one company who was sel l ing property in South Africa. He went to the US to investigate them and what they were selling and he was horrified by what he found. Due to that, IPS decided that we could not find the partners on the ground we could trust, and as we know, international property is only about two things – information and partners. In 2012, IPS adopted a different strateg y and 20

Offshore Handbook 2013

contacted a company they have worked with in the UK since 2005. They had helped 1100 British and

Irish investors invest over six years in the US. Scott prefers working with this company as they have the client’s interests at heart and proven to be trustworthy. It was a highly successful strategy as we experienced an incred ibly ba lanced v iew of the ma rket, the best of the US property players and a great understanding of risks and opportunities. It was these partners which were the catalyst for Scott to agree that he was now ready to invest himself and help his clients. With this strategy we have successf ul ly helped our clients get the right information and work with the best partners in our strategic investment areas. The returns which the clients have achieved to date, are testament to this. Conclusion Bottom line is that the US is the best opportunity in the f irst world. With the rand devaluing so dramatically, we have seen returns of over 50% in under 12 months. We assist 70% of our clients to invest without going to US and have the full solution – sourcing the property, renovating the property, managing and maintaining the property, financing, structuring, tax, bank accounts – everything you need. We also recommend our buyer’s trips on which you can join Scott on a visit to the US and meet the partners on the ground in person, get the right information, have lots of fun and most importantly take advantage of the opportunity. We have done four of these trips and happy to share all the testimonials from clients, as we get such amazing feedback. We offer complete transparency and the quality of our partners and their product sells itself.

RESOURCES IPS Invest www.reimag.co.za

LONDON

BY MIKE SMUTS

The Quick Fire Guide

To investing in London

he principle of letting out a property to paying tenants does not change, wherever you buy in the world. But the details do – and it’s often these small details in which the difference between profit and loss lies. You need to know where to look and what to buy to maximise your return on investment. In this article, we cover some of the main considerations. Have a detailed plan This is vitally important. Unless you have a clear goal and plan, you will easily be distracted once you start looking at different investments. Your emotions may take over, and before you know it, you may have bought a property that can’t produce the results you wanted. No entrepreneur worth his salt would start a business without a plan – you should be no different. You need to be crystal clear on what strategy you are going to follow to build your London portfolio. 22

Offshore Handbook 2013

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For some investors, price is all that matters. They will voraciously snap up anything, anywhere and in any

1. Public transport Unlike South Africa, car ownership in London is a

Decide where to buy Location, location, location – it may be a cliché, but understanding where to buy your first London investment property is of paramount importance. London’s property market is like no other in the world. It moves faster and differs vastly from street to street, let alone area to area. There isn’t just one housing market, but myriad ones, responding to a variety of specific factors, from factory and office closures to the pulling power of local schools.

2. Public amenities This point seems so obvious that it’s often overlooked. Another consequence of few Londoners owning cars is that people don’t necessarily do bulk monthly shopping for groceries – it’s a pain to lug it all back home on the bus or Tube.

A local housing market may be made up of commuters working in the city or those working for local companies or the government. There may be a demand for housing from students, their tutors and professors, or even short-term corporate tenancies for jet-setting consultants. All of these may find their rental property within a small area, with certain types of property more in demand than others. From one street to the next, demand may vary from studio flats through terraced houses to executive apartments.

easy access to shops, restaurants and bars, so ensure that these are close by.

condition, as long as it is cheap. Others are prepared to pay that little extra, and to cherry-pick deals from new developments in up-and-coming areas. There is undoubtedly a market for both of these approaches. Be sure to stick to your strategy, however. Too often I see investors, who are not clear on what investment strategy they want to follow, running all over London, looking at 100 completely different opportunities in completely different areas, only to return home confused, empty-handed and disappointed.

The local market will directly affect the type of tenant you attract, your rental return and the level of capital appreciation you can expect, so it could be argued that it’s the most important element to get right. There are many tips and tricks you can employ to find the right location for your London investment. But in the end, it all boils down to four fundamentals. www.reimag.co.za

luxury for most. The vast majority of Londoners rely on the public transport system to get around. Because of this, people have a tendency to congregate around areas with good transport links. They are willing to pay a premium to be within walking distance from a station. If you want to ensure that your London property appeals to a large market of potential tenants, and that it will benefit from good capital growth, it is essential that you invest in an area with good public transport.

It’s far more common for the average Londoner to pop into a shop on their way home from work and pick up a few items for dinner, to pick up a take-away, or just to eat in a restaurant. Your tenants will want

Keep in mind, however, that if your local rental pool consists of mainly families, they will shun noisy high streets and bars in favour of parks, libraries and leisure centres. 3. Education This is particularly important if the area has a high concentration of families. In London, competition is fierce for places in the best public and private schools. Parents will go to great lengths to ensure that their children get into well-regarded schools, often paying ridiculous amounts of money for properties in the right catchment area. Some even resort to renting a home for the time their children are at school, despite owning their own property elsewhere. Offshore Handbook 2013

LONDON 4. Employment City-centre living has become more popular in recent

years, with many professionals choosing to live close to where they work rather than to make the long commute back and forth between home and work. Canary Wharf is a perfect example of this; many investors have seen their rents increase substantially, thanks to new companies relocating nearby. Even if you are not buying in London’s city centre, it’s still important to consider local employment prospects while keeping an eye on the news for expansion plans or inward investment. A large company arriving on your doorstep or a new office block can spell an influx of prospective tenants and boost rentals. Lots of empty retail units or closing down signs in shop windows should ring alarm bells. Decide on the size of the property So, should you be buying one- or two-bed apartments, or opting for larger family homes? Truth is, this will all depend on the area you decide to invest in. One of the most common mistakes South African

investors make when buying property in London is

to come over with preconceived ideas of what they are going to buy to attract a certain type of tenant. I often hear variations of the following: ‘Well Mike, we are only look ing at t wo-bedroom apartments because we only want to attract young professionals.’ The problem with this is that you are ignoring the local market – and, most importantly, your prospective tenant’s requirements. While it’s true that t wo-bedroom apartments in Wimbledon let well because there is a large demand from professional shares, smaller properties, such as onebeds and studios do better in Canary Wharf, where people prefer to live alone. If you are working alone and you need help with deciding what size of property to invest in, there is only one place to start – the local letting agents. Letting agents deal with enquiries from potential tenants daily. They can offer a unique insight into potential tenants’ requirements and the amount of rent they will be prepared to pay for specif ic property types.

RESOURCES Smuts & Taylor 24

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Thinking beyond!

Consumer protection through effective industry regulation. Ensure you use the services of a registered estate agent. Tel: 011 731 5600 / www.eaab.org.za.

NEW ZEALAND

BY ANGIE REDMOND

Investing In New Zealand

September 2012. Districts which also recorded strong annual house price rises include Central Otago Lakes (14.4%), Auckland(8.4%), and Nelson/ Marlborough (8.3%). There were also modest house price increases in Canterbury/Westland (5.9%), Wellington (5.3%), Waikato/ BOP (3.5%), Manawat u / Wanganui (3.2%), Taranaki (2.4%), and Otago (2.2%).

ew Zealand is an island country in the South western Pacific Ocean. The county geographically compromises two main landmasses – that of the North and South Islands, and numerous smaller islands. New Zealand is

situated roughly 1 500 kilometres east of Australia. With a mild and temperate climate, temperatures range from 10 degrees Celsius in the south to 16 degrees Celsius in the north. The northern and north-eastern parts of the South Island are the sunniest areas in the country. Residential property prices in New Zealand have continued to rise in the third quarter of 2012. The national housing median price rose by 6% to NZ$371000 (US$304168) during the year to September 2012, according to the Real Estate Institute of New Zealand (REINZ). Locally, Southland registered the biggest annual house

price increase, with a 17% year-on-year (y-o-y) rise in 26

Offshore Handbook 2013

Only two districts recorded house price falls. House prices fell in Hawkes Bay (-2.9%) and Northland (-1.5%) during the year to end-September 2012. Auckland has the most expensive housing in the country with an average price of NZ$515000 (US$422228) in September 2012 while Southland has the cheapest housing with an average price of NZ$200000 (US$163972). This was supported by data released by the government valuer Quotable Value Ltd., showing the national residential property price index increased by 5.3% during the year to end-September 2012. Over the same period: · In Auckland Area, the average sales price soared 7.2% to NZ$575797 (US$472073) · In Wellington Area, the average sales price rose 2.3% to NZ$445679 (US$365394) · In Main Urban Areas, the average sales price increased 6.1% to NZ$478404 (US$392224) · The average sales price is now NZ$428308 (US$351153). www.reimag.co.za

During the housing boom from 2001 to 2007, house prices rose 123% (87% in rea l terms), including 24% in 2003, 12.5% in 2004, 14.5% in 2005, 9.6% in 2006, and 7.7% in 2007.

House prices started to fall in early 2008, as the global crisis spread to New Zealand. During 2008, house prices fell 8.95% (-11.93% in real terms). Then in 2009, house prices rebounded by 5.42% (3.4% in real terms). However in 2010, house prices fell by 1.65% (-5.45% in real terms). In 2011, house prices recovered slightly, rising by 2.8% (0.93% in real terms). The median days-to-sell of dwellings declined to 33 days in September 2012, from 37 days a year earlier, and total dwellings sold increased by 8%, to 5356 units. Residential mortgage loans were up 3.2% y-oy, according to the Reserve Bank of New Zealand (RBNZ). More than 58% of the total outstanding residential mortgages had floating interest rates in August 2012, up from just 12.36% in August 2007.

New Zealand’s economy was projected to expand by 2.2% in 2011, and 3.1% in 2013, partly due to the rebuilding plans in Canterbury, according to the IMF. Non-residents are generally allowed to buy houses in New Zealand. However, purchase of property does not give the buyer the right to live permanently in the country.

TEN FUN FACTS ABOUT NEW ZEALAND: 1

New Zealand is the first place on earth that receives the first ray of light. It specifically glints first on the small town of Rangitukia in North Island.

New Zealand established a state-run tourism department in 1901 – the first in the world.

The world’s smallest marine dolphin and the rarest sea lion thrive only in New Zealand’s waters.

The heights of Mount Everest were first conquered by Sir Edmund Hillary, a New Zealander.

The first Rugby World Cup in 1987 was won by the New Zealand All Blacks.

Vineyards located in the southernmost tip of the world belong to New Zealand’s Central Otago region.

Wellington’s old Government Building is the biggest wooden structure in the southern hemisphere.

In 1893, New Zealand gave women the right to vote. It was the first country to do so.

Only three countries in the world have two official national anthems – Denmark, Croatia, and New Zealand.

New Zealand has a ratio of 400 golf courses for every four million people. It has the greatest number of golf courses in the world.

Property prices are expected to continue rising.

“With the strong, sustained period of growth recently, and the typical expected lift over the coming months, property values are not expected to slow,” said Kerry Stewart of Quotable Value, Ltd.

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Offshore Handbook 2013

MALTA

ADVERTORIAL

Malta launches its new Global Residence Programme

ituated in the heart of the Mediterranean, the islands of Malta and Gozo are ideally located as lifestyle and investment destinations. With a history dating back to the time of the Crusaders this ancient land is steeped in culture with a heritage spanning over 7000 years. The cosmopolitan, crime free environment, warm friendly people and fantastic weather year round make Malta a popular tourist destination and a highly sought after country in which to reside. Crystal clear seas offer world class diving, sailing and other water sports while the long stretches of white sandy beaches are a popular drawcard to holiday makers. English is an official language and the language of business in Malta. In recent years Malta has been accepted internationally as a reputable international business, financial and maritime centre and has an excellent reputation and track record. It has the largest free port in the Mediterranean and although an on-shore low tax jurisdiction, Malta is not included among the black listed tax havens. When Malta first joined the EU in 2004 and signed the Schengen treaty, their residency programme became highly attractive to non-EU nationals wishing to benefit from visa free travel within all EU countries. However the high level of interest in the programme resulted in the government introducing the High Net Worth Investor programme and raising the requirements for would be investors thus making it a less attractive proposition. The new Global Residence programme launched in June 2013 replaces the High Net Worth Individuals Scheme and eligible applicants can once again benefit from attractive investment opportunities. This new option offers non-EU nationals great advantages and favourable thresholds with a similar programme being made available to EU nationals shortly.

In order to qualify for the Global Residence Programme, investment in immovable property has to be at least Euro275,000. while the minimum value for property bought in the South of Malta or in Gozo is Euro220,000. Applicants will also be eligible for residence benefits if they rent property on an annual basis to the value of Euro9,600 in Malta and Euro8,750 in the South or in Gozo . Other attractive benefits in this programme include a reduced minimum tax advance payment or threshold of Euro15,000 with a tax of 15% on any further untaxed income remitted into Malta - capital or capital gains would be untaxed. The previous requirement to place a Euro500,000 bond with the government and an additional Euro150,000 per dependent has also been removed however a standard processing fee of Euro6,000 is applicable when a property is purchased in Malta and Euro5,500 if the property is bought in Gozo or South Malta. There are no minimum stay requirements however residents under the Global Residence Programme and their dependents, have to be covered by health insurance. They will not be entitled to free state health services. There are also no employment restrictions under the new programme.

Malta has ranked 2nd out of 193 countries in International Living’s: “Quality of Life Index 2011” and ranked 1st for Best Climate in the World. Monarch & Co, in association with Malta’s leading estate agents Frank Salt Real Estate and EMD legal and tax advisors will be hosting seminars showcasing all that Malta has to offer to South African nationals interested in the Programme. These will take place on the 20th and 22nd August in Johannesburg and Cape Town respectively. For more information or to register for the seminars one may visit www.malta-residency.com.

AUSTRALIA

BY ANGIE REDMOND

Earn An Income In Australia

he major cities such as Sydney, Perth, Brisbane and Melbourne are seeing the biggest rises in property prices. Since the majority of buyers tend only to purchase as a result of a permanent move, these cosmopolitan centres provide the best potential for work – especially for those on a ‘Sk illed Migrant’ visa. Having said that, the booming tourist industry provides a great way to earn an income in a coastal area in popular destinations such as the Gold Coast and Cairns in Queensland. If you are looking to make your money stretch further, then you could look 30

Offshore Handbook 2013

in a more rural area – just remember that rural in Australia could literally mean remote, so do your research thoroughly first. Once you have had an offer on an Australian property accepted you would exchange contracts straight away. You are entitled to a cooling off period (usually five to ten days), and the contract will be conditional on certain clauses (such as a mortgage approval), but basically you are now tied into the purchase and will be required to pay a ten per cent holding deposit. Please note that the www.reimag.co.za

Transfer Registration fee, which varies from state to state; legal fees, which generally range between

AUD$500 and $1 200 (£250 and £600); mortgage application; local tax, which again varies from state to state; survey, which will cost in the region of $500 (£250) and buildings insurance. Some states will also demand that you have a termite and pest inspection, and if you are buying an apartment it is advisable to commission a strata inspection, which determines whether the building as a whole has had any structural problems – or been subject to any administration concerns. Australian taxes also vary depending on which state you live in. However, if you spend more than si x months in a year in Australia, you automatically become liable for income tax. Capital gains tax is payable on any property apart from your principal residence, but the amount you pay va r ies depend ing on you r persona l circumstances. But what about the legal stuff? Foreign persons should notify the government and

cooling off period does not apply if you purchase at an auction. Your solicitor will run local searches, similar to those in South Africa, and will check the title deed before you are able to complete the transaction. Completion occurs six weeks after the day of exchange. Know the relevant fees and ta xes. As in any

countr y, buying a propert y in Australia is an expensive business – on average you should budget around five per cent of the purchase price to cover the red tape. This is broken down into a Land www.reimag.co.za

get prior approval to acquire an interest in certain types of real estate. An ‘interest’ includes buying real estate, obtaining or agreeing to enter into a lease or licence, or f inancing or prof it sharing arrangements. Regardless of value, foreign persons generally need to notify the government and get prior approval to take an interest in residential real estate, vacant land or to buy shares or units in Australian urban land corporations or trusts. Foreign persons also need to notify for prior approval if they want to take an interest in developed commercial real estate that is valued at $54 million or more – unless the real estate is heritage listed, then a $5 million threshold applies. An exception for developed commercial real estate applies to New Zealand investors and United States investors, where a $1. 078 million threshold applies instead. Offshore Handbook 2013

AUSTRALIA Foreign persons should also notify for review if they have any doubt as to whether an investment

Australia (Commonwealth, State or Territory, or local) or a statutory corporation formed for a public

Further information about buying real estate The government has decided that some t y pes of investment in real estate are contrary to the national interest. This section outlines these prohibitions as well as the t ypes of real estate that foreign investors may buy and whether they need government approval to do so. If you are intending to buy real estate in Australia, you should make your purchase contracts conditional on foreig n investment approva l, un less you already have approval or you are exempt from the Foreign Acquisitions and Takeovers Act 1975. Signif icant pena lties may apply to ineligible owners of real estate.

Other exemptions may apply if you are: · A company, trust or managed investment scheme (primarily) for the benefit of individuals ordinarily resident in Australia; · An Australian corporation that is owned by individuals who are exempt15 or an Australian trust for the benefit of such individuals; · A corporation that is providing custodian services; or · Buying shares in certain Australian urban land corporations that are publicly listed on an · Australian Stock Exchange, or units in certain Australian urban land trusts, · Buying residential real estate in Integrated Tourism Resorts.

is notifiable.

Who is exempt? You do not need government approval to buy residential real estate if you are: · an Australian citizen (living at home or overseas) or · · ·

you are ordinarily resident in Australia; a New Zealand citizen; a foreign national who holds an Australian permanent resident visa; or a foreign national buying a property as joint tenant with an Australian citizen spouse.

Regardless of your citizenship or residency, you do not need government approval for: · New dwellings bought from a developer that has pre-approval to sell them to foreign persons; · · · · 32

An interest in a time share scheme that allows you (and any associates) to use it for up to four weeks per year; Certain residential real estate in Integrated Tourism Resorts – see below; An interest acquired by will or devolution by operation of law; or An interest acquired from a government in Offshore Handbook 2013

purpose.

You do not need the government’s approval to buy residential property that is within the bounds of a resort designated as an Integrated Tourism Resort prior to September 1999. For resorts

designated from September 1999, the exemption only applies to developed residential property that is subject to a lease of 10 years or more to the resort operator and that is available as tourist accommodation when the owner does not occupy it. The normal foreign investment rules apply to all other property within the resort, including vacant land for development. Conditions must be met to qualify for designation. WHEN SHOULD YOU APPLY? You should lodge an application in advance of any transaction, or you should make your purchase contract conditional on foreign investment approval. A transaction should not proceed until the government advises you of the outcome of its review. www.reimag.co.za

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Rental Tracking

FRANCE

BY ANGIE REDMOND

Before You Buy Consider your long-term plans

Offshore Handbook 2013

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et’s put propert y investment marketing i n Fr a n c e i n t o c o n t e x t f i r s t . It i s

may sta r t a fa mi ly, a nd young fa mi l ies may need to move nearer to secondar y schools or

Over the last decade, more and more buyers have been investing in a variety of property for sale in France, in line with the trends outlined

So t hen it ’s t ime to t rade up, t rade dow n, or just move on. Some will want to buy a new property for sale in France more suited to their needs, others may prefer to cut their investment losses and ret urn to their countr y of origin. But it is not always that simple, particularly if you’ve invested in a property leaseback scheme in France and are selling up before the contract (usually 9-11 years) and the 20 year qualifying per iod for t he 19.6% VAT d iscount has r un

However, what some purchasers fail to take into account is t hat persona l circumstances inevitably change over time. Childless couples

Obv iously, it pays to take a long-term v iew b e for e c om m it t i n g y o u r s e l f to a pr op e r t y purchase. Ask yourself if what suits you so well today w il l stil l be the right choice f ive years hence? Wi l l it be possible to adapt, e x tend or convert your propert y investment to meet you r cha ng ing needs? A nd if not, how easy w il l it be to trade places? Current needs and wishes have to be balanced against likely future developments. It can be wise to plan your exit route, or at least have an idea of what your next move might be.

important to realise that it has developed dramatically over the last ten years, particularly as far as British buyers are concerned. As growing numbers of overseas buyers have stepped onto the property investment ladder to buy property for sa le in France, so the number of bargain properties in France suitable for renovation and farms with outbuildings ripe for gîte conversion have dwindled. On the other hand, new build developments have continued to f lourish and buying off-plan has become commonplace for purchasers who like the comfort and convenience of a truly modern home. In addition, the growing number of Brits relocating to France has resulted in the increasing popularity of large family-sized character homes, while investors have found that buying property in France can give better returns than stocks and shares or pension funds.

above, and in accordance with their personal c i rc u ms t a nc e s . D ow n sh i f t i n g c ouple s a nd families looking for a better quality of life have been purchasing permanent residences, and some have chosen to buy larger properties that provide them with both a family home and an income stream, offering B&B accommodation. Holidaymakers have bought older, r ura l cot tages or newer, coastal apartments, investors have opted for ski chalets and seaside property developments (often bought via a leaseback scheme), and city centre apartments, while older folks have been investing in v il las of a manageable size and retiring to the sunny south of France.

www.reimag.co.za

u n iver sit ie s a s c h i ld ren b ecome te ena ger s. Able-bodied pensioners will f ind themselves becoming less act ive, or a su r v iv ing g ranny might need to come a nd l ive under t he fa m i ly roof. Mone y i nve sted i n a prop er t y leaseback scheme in France may be needed to f und u rgent hea lt hca re or ot her un foreseen f inancia l demands; the job that prompted a move to France may fall through, the business opportunity that seemed so clear cut may fail to transpire… the list goes on and on.

its cou rse; or i f you’ve “over-specced ” you r property to the point where you cannot recoup your investment; if you’ve bought a home that has limited appeal to others due to its location, layout, size, condition or decoration.

Offshore Handbook 2013

FRANCE Here are some hints for buying property in France: Trading places · Avoid buying property for sale in a poor location of France – it’s the one thing that cannot be changed · Consider the size and layout; if there are drawbacks, can they be remedied? · Properties in habitable condition offer obvious advantages; deal with the essentials to secure a quicker sale · Avoid over-speccing; those gold bath taps may not be to everyone’s taste, and you are unlikely to recoup the cost of your investment · Steer clear of unusual colour schemes and flamboyant décor · Modernising an ancient bathroom is a must · Freshen up a dingy kitchen to add instant appeal · Do some DIY - deal with any obvious defects that would put off purchasers

Fact 2 French cuisine is considered one of the best cuisines in the world and there is an average of two cooking books being published every day. Fact 3 France is famous for having many castles, palaces and manors. It’s said to have around 40 000 castles. Fact 4 There are more than 300 kinds of cheese made in France. Fact 5 One of the most popular symbols in France is the Eiffel Tower which is a famous tourist attraction that stands at 300 meters tall. Fact 6 The French state was established in 843, breaking up from the Carolingian Empire. Fact 7

Selling your property for in France? Here’s what you need to know… Avoid selling in the early years after purchase, when you will probably make a loss; allow at least five years to recoup your buying costs Is the local property market in a slump? Unless you are obliged to sell, it can be wiser to rent out your home long-term and wait for the market to pick up. If you need to sell your French property before buying a new home, this should be included as a conditional clause in the purchase contract. Fun Facts About France Fact 1 Wine has been made in France since the Roman empire.

Offshore Handbook 2013

France is the largest Country in Western Europe and has seven mountains and five major rivers. Fact 8 The French national anthem is called la Marseillaise because it was f irst sang by soldiers from the Marseille marching to Paris. Fact 9 The Statue of Liberty was made in France and then gifted to the US in 1886, in celebration of its centennial. Fact 10 The word “France” means “land of francs.” The Franks are Germanic tribes who lived in Northern Europe after the fall of the Roman Empire.

www.reimag.co.za

CYPRUS

BYJENNY ELLINAS

Forging Ahead

With prosperity in Cyprus

Setting the scene to the bail-in

So what went wrong? In 2010 the IMF and EU announced they would assist Greece and other EU countries in respect of financial collapse/difficulties; and despite its small size, Cyprus stood by its EU

fter reeling from the harsh “ bail-in” requirements imposed by the Troika (the IMF, EU and ECB) in March this year; the truth is that Cyprus has already dusted itself off and is focusing on all of the existing elements that make it so appealling on so many levels; as well as new prospects.

On 01 January 2008 Cyprus adopted the Euro after coming off the very strong Cypriot Pound (on 31.12.2007 it was R19,92 to CY£1 !), the economy was flourishing and it was the peak of Cyprus’ property boom. It took a couple of months’ lag after the USA Lehman Brothers investment bank’s bankruptcy on 15 September 2008 for the effects of the global economic decline to hit the island. But where they were fortunate is that the Cypriots had – and continue to have – a very high GDP per capita (in 2009 the IMF ranked them 30th at $29,427 p/p).

In 2009, the island enjoyed income from many diverse industries: · Ship management and registrations - the largest in the world · Financial services - lowest corporate tax rates in Europe (then capped at 10%) www.reimag.co.za

Tourism: 2.4million tourists; actual revenue €1,8 billion Exports: pharmaceuticals, wines, fruit and vegetables. €1.53 billion.

partners in 2011 to bail these countries out. All EU countries were forced to take a haircut on Greek private sector debt; as well as to assist in the bailout of other European countries. Two of Cyprus’ largest banks (Laiki Bank and Bank of Cyprus) were the highest exposed and gave away almost €5bn in Greek Government Bonds in an EU-led effort to restructure the Greek national debt. This of course had direct knock-on effects last year as both banks were then themselves faced with financial difficulties which affected the normal financial arrangements of the Cypriot government. The government was forced to request a loan from Europe until its natural gas and oil reserves are realised in the next two to four years. W here we are now? The Troika responded positively – although harshly! – and in March agreed to a ‘bail-in’ which included lending Cyprus €10bn Offshore Handbook 2013

CYPRUS

to refinance its debt; as well as to provide as much liquidity to the Cypriot banks as is needed during this period: €2.5bn will recapitalise the Cypriot banking sector, €4.1bn will redeem maturing government debt and €3.4bn will cover the government’s fiscal needs in the next three years. The Cypriot president has been commended by European finance ministers on the government’s

swift reaction to restructure Laiki Bank to be split into two banks – a “good bank” taking the good loans and deposits up to €100 000 which are guaranteed by the Cypriot government; and a “bad” bank which will go into liquidation. The Bank of Cyprus will be recapitalised using a percentage of the money from deposits over €100 000 in exchange for shares in the bank. The government also imposed capital controls (which are now virtually lifted) to ensure there was not a run on the banks thereby preserving Cyprus’ reputation as a reliable banking hub. Cyprus’ global appeal As a corporate investment destination, Cyprus is widely recognised as strategically being a very important business centre excelling in financial services, shipping 38

Offshore Handbook 2013

and maritime activities. Cyprus has a highly educated workforce, is a global player offering true ease-of-doingbusiness platforms and has a track record of adopting and implementing solid macroeconomic strategies. Being conveniently located at the crossroads of three continents (Africa, Asia and Europe) gives Cyprus a distinct advantage for businesses wishing to be exposed to every market – all the while offering access to top facilities, services, amenities and infrastructure. Rounding off the

appeal is Cyprus’ low corporate tax rate, capped at 12.5%. Cyprus’ vast natural gas reserves Cyprus identified 13 sectors in their Exclusive Economic Zone (in the seas that exclusively belong to them) and in late 2011 Cyprus entered the natural gas game in a big way. The US company Noble Energy was contracted to do initial exploration in the furthest South sector (sector 12) and the initial findings there excited not only the EU but energy industry as a whole. seven trillion cubic metres of natural gas (conservatively worth €100bn per annum) was discovered in this sector alone; with over €100trn per annum anticipated for all 13 sectors! This is the largest find to date in The Med; and the implications for Cyprus in the short, medium and long term are enormous. Not only will Cyprus now become a supplier of natural gas to Europe and Asia but will also be a significant player in this space globally. The gas liquefaction terminal www.reimag.co.za

(power plant) is expected to be completed in 2016 with the first oil extraction scheduled for late 2019. So, in the short term the construction and engineering fields will be given a boost; in the medium term all of the peripheral services will benefit and in the long term huge amounts of revenue will be realised.

Tourism remains buoyant and year-on-year growth in tourist numbers cements Cyprus as a preferred destination in Europe. Ryan Air, EasyJet, Aegean Air and all of the European airlines all have Cyprus on their routes; and Air France recently signed an agreement to increase their flights to Cyprus due to high demand. Outdoor sports are in abundance - from skiing in the mountains in winter to horseback riding on the beach in the summer; and all of the extreme and team sports are on offer too. Because of the incredibly beautiful weather (320 days of sunshine every year!) Cyprus remains a firm favourite for weddings and honeymoons. The crystal clear waters and stunning beaches in Cyprus continue to rank in the top 10 in Europe; and the latest accolade for this country is that they have just been voted number 1 for having the cleanest beaches in Europe! The president’s strategy to create jobs and stimulate the economy has been widely affirmed as a solid action plan to get Cyprus back on track to growth within the next few years. He recently commented “…if new fiscal measures are needed, there will be no new taxes but rather better management of state expenditure.” He also announced that Cyprus would be awarding casino and golf estate licences to spur the construction and services industry. What is the appeal for EU residency and the associated lifestyle aspects? Citizenship and residency in Europe To acquire an EU passport (ie become a citizen of the EU) is not a short and easy process – each country requires the applicant to invest in a residential property www.reimag.co.za

and/or business plus physically live in the country for a prescribed minimum number of days per annum for a set number of years.

As a South African passport holder, there are currently three ways to secure Cypriot citizenship and therefore a Cypriot passport: 1. Marriage to a Cypriot citizen – after completing three years of marriage and harmonious cohabitation, living permanently in Cyprus: or 2. Through naturalisation - living in Cyprus permanently for 5 - 7 consecutive years (ie a minimum of 183 days every year, for 5 – 7 years); or 3. Investment as an ultra-high net worth individual (HNWI), investor and entrepreneur. But, to acquire permanent residency (which is the legal right to reside in a country) is a different process altogether; and the permanent residency opportunity in Cyprus is completely unique. Cyprus is the only English-speaking country in Europe offering permanent residency without

requiring that you physically live in Cyprus for a minimum prescribed number of days per annum. In other words you can acquire permanent residency, carry on with life as it is in South Africa and then when you’re ready to move across to Cyprus, as permanent resident you have the legal right to live in Cyprus. With regards to acquiring permanent residency in Cyprus, the basic requirements are as below: 1. Purchase a residential property 2. Pay 66% of the purchase price 3. Prove income 4. Remit funds to Cyprus 5. Secure a medical policy 6. Have a clean police record The spouse and all children under the age of 18 automatically qualify under the main applicant’s Offshore Handbook 2013

CYPRUS application. With qualifying as a shareholder in a legal entity the house purchase will be accepted even when

made in the name of the company and not in the name of the applicant, provided that the company is registered in the name of the applicant and/or the name of applicant and his spouse and he/they are the sole shareholders. The visa itself As Cyprus has not signed the Schengen border agreement (this is imminent as they are a full member of the EU and one of the requirements is to sign this agreement), the permanent residency permit currently gives a long-term, multiple-entry Cypriot visa. This means that as a non-EU passport holder you will still need to apply for a Schengen visa to travel to Europe. However as a permanent resident of Europe to apply for a short or long-term Schengen visa directly at one of the embassies in Cyprus is a lot easier as they look at your application differently than if you are a South African applying. the benefits of a Cypriot (European Union) permanent residency permit · The legal right to live in Cyprus, at any time

· No prescribed minimum days per annum to physically live/be in Cyprus except two days every two years (ie continue to live and work in South Africa while still retaining the permanent residency permit) · The permit is for life (if still visiting Cyprus) and therefore does not need renewing · Bypass strict visa requirements · Access to top universities and education facilities · High standard of living · Low cost of living · Access to first world medical facilities · Entitlement to basic health care · Access to the largest trading block in the world · No import duties on goods and services within EU · Powerful tool for international tax and legacy planning · Low personal tax regime – you keep your wealth! 40

Offshore Handbook 2013

· Europe is on your doorstep · Freedom of association. Investigating the property opportunities in Cyprus When investing in bricks and mortar it make sense to work with professional, accredited and reliable companies and individuals. And in Cyprus it is no different. All reputable developers will be members of the Cyprus Land & Building Developers Association (the association’s aim is the protection and service of customers and the profession); and all regisered estate agents will be members of the Cyprus Real Estate Agents Association - which is a semi-governmental body that regulates the industry. It is important to check the following with the local Lands Office · · ·

that the vendor is the legal owner of the property; that the vendor has obtained the agreed town planning and building permits; that the sale contract is deposited with, stamped and registered by the local Lands Office.

Lastly, ensure that your agent or developer has a credible reputation and an impressive track record to ensure that you are dealing with a professional and ethical company.

Taking the time to check things out for yourself In this day and age researching properties online before making a financial decision makes perfect sense. But to invest in a property without having seen if for yourself is investment suicide! The best way to make a decision about buying a property abroad is by taking the time to view it for yourself. Cypriot Realty offers customised property inspection trips to Cyprus to investigate opportunities. We’ll be there with you as you explore Cyprus, experience the warm hospitality from Leptos Estates (the company Cypriot Realty exclusively represents in Cyprus) and of course look for your new home, making your “Plan B” a reality! The property inspection www.reimag.co.za

Official South African marketing agent for LEPTOS ESTATES www.LeptosEstates.com

CAPE TOWN Ground floor, Liesbeek House, River Lane, Mowbray PO Box 23644, Claremont, 7735 Tel: +27 21 680 5272 | Fax: +27 86 670 6490

SANDTON 2nd Floor, West Tower, Nelson Mandela Square, Sandton, PO Box 785553, Sandton, 2146 Tel: +27 11 881 5706 | Fax: +27 86 670 6490

Contact: Jenny Ellinas | +27 83 448 8734 | jenny@cypriotrealty.com | www.cypriotrealty.com

CYPRUS FACTS AND FIGURES Total Size

9, 248km2

Government Controlled Area

5, 456km2

Population

840, 000

Permanent Expats

250, 000

South Africans Living In Cyprus

trip itself is personalised, so you will have your own representative from Leptos Estates host you during

1, 370 (2011 census)

VAT Standard Rate

18%

Reduced Rate 1

Reduced Rate 2

Zero Rate

Accessing Europe / the Schengen States Currently a Cypriot visa is required for anyone wishing to enter Cyprus excluding UK, US and EU citizens and passport holders. Although Cyprus is a full member of both the EU and the Schengen Agreement, they have not yet signed the Schengen border/passport control addendum; however this is imminent. Acquiring permanent residency in Cyprus equates to automatic entry into Cyprus; and when the Schengen addendum is signed, access will extend to the other Schengen States.

0% PERSONAL TAX

Up to €19, 500

€19, 501 - €28, 000

20%

€28, 001 - €36, 300

25%

€36, 301 - €60, 000

30%

€60, 001 +

35%

CGT

20%

Exempt : transfer on death; gifts between spouses, parents, children & relatives up to 3rd degree etc. Deductions

1st €85, 430

ESTATE DUTY

Nil

PROPERTY TAX Annual Immovable Property Tax (rates) VALUE OF PROPERTY

TAX

CUM. TAX

€1 - €40, 000

0.6%

€240

€40, 001 - €120, 000

0.8%

€640

€880

€120, 001 - €170, 000

0.9%

€450

€1, 330

€170, 001 - €300, 000

1.1%

€1, 430

€2, 760

€300, 001 - €500, 000

1.3%

€2, 600

€5, 360

€500, 001 - €800, 000

1.5%

€4, 500

€9, 860

€800, 001 - €3, 000, 000

1.7%

37, 900€

€47, 260

€3, 000, 001 and over

1.9%

TRANSFER DUTY VALUE OF PROPERTY

TAX

CUM. TAX

€1 - €85, 000

€2, 550

€85, 001 - €170, 000

€4, 250

€6, 880

€170, 001 +

CORPORATE TAX

12,5%

the trip in order to make your time both an enjoyable and rewarding experience. Your agent will be at your disposal to address any queries that you may have on a one-on-one basis.

As a permanent resident in Europe, staying in any country in the EU is limited to 90 days at a time. This is a border / passport control requirement to monitor movement and is applicable to all EU permanent residents. Looking ahead Cyprus’ real estate environment hasn’t been as dramatically affected as the rest of Europe because of its small size in comparison and the limited supply of land. On the contrary, the lifestyle aspects of the island, strong tourism industry, stable economy and booming natural gas industry make this island an investor’s paradise and an ideal place to acquire residency. In Cyprus the lifestyle really is the best of the best. Living is laidback - you set your own pace. And what better place to do this, than where the blue skies meet the Mediterranean Sea: on the beautiful island of Cyprus.

RESOURCES Cypriot Realty

Offshore Handbook 2013

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AFRICA

BY GAYE DE VILLIERS

Botswana Demand is high

ormerly the British Protectorate of Bechuanaland, Botswana a dopte d it s ne w n a me upon independence in 1966. The economy, one of the most robust on the continent, is dominated by diamond mining. The country has an area of 600 000 sq km and is bordered by Namibia, Zimbabwe and South Africa. The country has warm winters and hot summers; the landscape is predominantly flat

with gently rolling tableland, with the Kalahari Desert located in the southwest of the country. Natural resources include diamonds, copper, nickel, salt, soda ash, potash, coal, iron ore and silver.

BOTSWANA

• Population: 2.0 million • Language: English / Tswana • Currency: Pula • Main Export: Diamonds • Capital City: Gaborone • Inflation: 7.5%

Botswana has maintained one of the world’s highest economic growth rates since independence in 1966, though growth fell below 5 percent in 2007-08, and turned sharply negative in 2009, with industry down by nearly 30 percent. Through fiscal discipline and sound management, Botswana transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of $13 100 in 2010. Two major investment services rank Botswana as the best credit risk in Africa. Diamond mining has fuelled much of the expansion and 44

Offshore Handbook 2013

currently accounts for more than onethird of GDP, 70-80 percent of export earnings and half of the government’s revenues. Botswana’s heavy reliance on a single luxury export was a critical factor in the sharp economic contraction of 20 09. Tourism, financial services, subsistence farming and cattle raising are other key sectors. Although unemployment was 7.5 percent in 2007 according to official reports, unofficial estimates place it

closer to 40 percent. The population of Botswana is estimated at a little over two million. Debra Albers, manager of Pam Golding Properties office in Gaborone, Botswana says residential property market trends are driven by economic factors. Currently De Beers, 15 percent owned by the Government of Botswana is moving its subsidiary, Diamond Trading Company (DTC) from London. “Approximately 60 families will be relocating to Gaborone of which roughly 50% have already arrived and the rest should relocate by October this year (2013) and will need high-end executive accommodation,” she says. “We are also experiencing demand for top end properties from the Diamond Sight Holding companies.”

RESOURCES

Pam Golding www.reimag.co.za

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AFRICA KENYA

BY GAYE DE VILLIERS

Residential Development In Kenya

• Population: 41.6 million • Language: English / Swahili • Currency: Kenyan Shilling • Main Export: Black tea • Capital City: Nairobi • Inflation: 10%

xisting and new residential development properties are currently in demand in Kenya, reports Kunaal Samani, a director of Pam

Good buying opportunities “At present, from a local home buyer perspective, areas such as Athi River and Syokimau, which are located in

“The most sought after properties are located in areas such as Muthaiga, Kileleshwa, Runda, Gigiri, Loresho, Lavington and Kitisuru, and are mainly in the price range from approximately Kes (Kenyan shilling) 20 million to 100 million (approximately US $235 000 – US $ 1.2 million). Positively, the development sector is presently experiencing the most growth in demand as many apartments and townhouses are now coming to fruition and becoming available for purchase, helping meet a high pent-up demand from the domestic market,” he says.

He says middle income buyers are attracted to areas such as Nairobi west, Langata and South C, where prices range from Kes 10 million to 20 million (approximately US $ 117 000 - $235 000), while for higher income buyers, areas such as Lavington and Brookside are popular, with a price range of Kes 25 million - 50 million (approximately US $ 295 000 – US $ 588 000). High net worth buyers purchase in areas such as Runda and Muthaiga, where properties start from Kes 50 million upwards (ie from approximately US $588 000).

Golding Properties in Kenya, which has an office in Westlands in Nairobi, and is looking to expand soon in the Mombasa area.

Samani says there is a high demand among business executives and young professionals who seek to boost their standard of living and experience a more luxurious lifestyle. 46

Offshore Handbook 2013

the outskirts of Nairobi, offer affordable prices for two to three bedroom apartments starting from about Kes 5 million (approximately US $ 58 000).”

Samani says areas with high appeal for South African home purchasers are those such as Gigiri, www.reimag.co.za

Trident Heights Riara, which is an apartment complex consisting of 24 units in three- to five-storey blocks with each unit comprising three bedroom apartments priced from Kes 21.5 million and four bedroom penthouses with en suite master bedroom priced from Kes 37 million.” Commenting on the market in general, Samani says key factors which are currently impacting on market activity and the demand for homes include the following:

Muthaiga, Runda, Nyari, Kitisuru, Brookside and Riverside. Says Samani: “These are the most suitable for South African purchasers due to their vibrant, upbeat

neighbourhoods with access to international schools, shopping malls, restaurants, bars and other amenities. In addition, rental yields on residential apartments range up to 7.5 percent for buy-to-let investors. Foreigners can acquire property or land on a leasehold basis (99 years) in Kenya and mortgages are easily available. “Activity in the property market is gradually picking up as most buyers and investors had put on hold decisions until the aftermath of the elections. We expect to see prices rise now that the elections have taken place, and already we note an increase in stock coming onto the market as well as a good demand for property. “From a development perspective we have sold out two projects namely, Trident Park Langata - which comprises 45 very appealing maisonettes, each consisting of four en suite bedrooms priced at Kes 20 million, and www.reimag.co.za

Location - this is the most important factor driving the property value and determines how much appreciation would take place to attract investment and other buyers.

Infrastructure - well-maintained road networks are attracting purchasers of property. Properties that have been developed with access to good road networks experience a strong demand from buyers as opposed to those without such access.

· Construction - construction of the building impacts on the value of the building, and elements such as architecture, design and materials used determine the worth of the property. Buyers seek properties with a long life span and sound and appealing architecture. ·

Land availability - if there is scarcity of land, the value of properties will increase in specific areas. Areas situated in the heart of the city are much more expensive than those on the outskirts. Most buyers are therefore more inclined to acquire land that costs less.

Amenities - properties that have amenities such as swimming pools and gyms offer a better price appreciation as they mostly attract new buyers who want to experience a luxurious lifestyle.

RESOURCES Pam Golding

Offshore Handbook 2013

AFRICA

BY DENISE MHLANGA

Retail Hits The Mark In Ghana

t a time when Western economies are faltering, positive statistics make particularly attractive reading, says Florence Menson, JHI Ghana’s centre manager of Marina Mall in Accra, the capital city of Ghana. “International investors persuaded of the merits of African investment will still be careful to minimise their risks, which leads us to Ghana.” Menson explains that the death of President John Atta Mills in July 2012 was mentioned in news bulletins around the world but did not become a cause for political unease.

GHANA

• Population: 25 million • Language: English • Currency: Ghana Cedi • Main Export: Cocoa • Capital City: Accra •Inflation: 9.8%

In August 2011, the Ghanaian parliament approved a USD3 billion loan from the China Development Bank. This facility is the largest ever secured by Ghana and will be used to finance its infrastructure gap. “This influx of funding will need to be spent wisely and governed by a framework. And while foreign investment is increasing to record highs, there are, however, bumps in the road ahead,” she 48

Offshore Handbook 2013

points out. The value of the Cedi has plummeted from below 1.5 to the Dollar to almost 2 Cedis to the Dollar over the past year. Current retail real estate environment William Bobie, executive director, Assenta Real Estate Investment Managers says according to a World Bank classification, on 1 July 2011 Ghana moved from a low-income to lower middle-income status. A gross national income of $1 571 was achieved in 2011, up 44 percent from 2009 levels per a Ghana Statistical survey.

The new phenomenon of a middle class, plus the country’s reputation for political and economic stability and cultural tolerance have rapidly revolutionised the retail property market in recent years. “Dedicated modern retail malls still account for a relatively small proportion of the retail market.” Bobie www.reimag.co.za

says Accra, the country’s capital, is the main retail hub for international retailers and home to the modern shopping malls in operation offering a diverse and buoyant informal retail landscape. He says A&C Square in 2005, followed by Accra Mall in 2007, set the pace for modern retailing. A&C Square in the East Legon area of Accra is largely a neighbourhood centre with a recent addition of substantial office space. Accra Mall changed the face of retail considerably with 21 000 square metres of lettable area, anchored by Shoprite and Game. “The success of A&C Square in East Legon has confirmed the need for neighbourhood retail centres in Accra.” Melcom and Maxmart, local general merchant retail stores, have capitalised on this emerging demand by opening stores in almost all the major areas of Accra. Koala, a local grocery retailer, has also responded to this trend by recently opening another shop in the Airport Residential Area to add to its flagship outlet in Osu. On a regional level, Kumasi and Takoradi, the next two most populous cities in Ghana, have no formal retail centres even though the fundamentals look right. There is a huge opportunity for first time movers to develop shopping centres in these regions, says Bobie. Space supply and development With Accra Mall and A&C being the only formal retail centres available in the market, occupancy rates are near 100 percent. Movenpick Hotel’s 2 000 square metre retail space offering 26 shop units is also fully occupied by a variety

augment the current 30 000 square metres of formal retail space. Since the completion of Accra Mall in 2007, surprisingly no formal retail shopping mall has been built. However, a number of small to medium schemes are under construction in Accra, including retail and office developments of Marina Mall, Nester Square, One Airport Square and Icon House in the Airport area, The Octagon in Ridge plus the Oxford Street Mall and hotel development in Oxford Street, in Osu. Menson says notable inclusions are Oxford Street Mall and Marina Mall, which are both expected to complete in the coming months, and One Airport Square, an ambitious Green Star compliant project that will set the bar for environmental standards. In addition, numerous pipeline projects are in the planning stages. These include some sizeable developments: West Hills, Project Sunrise and Gold Coast City in Accra, Apolonia in Tema, King City in Takoradi (all mixed-use developments), Accra Mall extension retail development in Accra, and various developments in Kumasi. West Hills Mall, if completed by 2014, is anticipated to be the largest purpose-built mall in Accra offering about 26 000 square metres. Bobie says the retail occupier market has transformed in the last seven years with the entry of international retailers such as Shoprite, Game, Bata, Hi-sense, Mr Price, Woolworths, TM Lewin and Stellar Deluxe, while KFC and Deli France are recent new additions to enter the Ghanaian market. “South African retailers currently dominate the

of boutique shops while Shoprite’s solus unit on the western corridor of Accra is also self-occupied with no available space to let. “Although there is a high demand for retail space from both foreign and local occupiers, supply of space has been sluggish,” says Bobie.

international retailers but there are clear signs that European and American retailers are also eyeing the market and with the right space we believe the market will become competitive and diverse in the very near future,” says Bobie.

With a growing population of 2.5 million plus in Accra, the city has capacity for more retail centres to

RESOURCES

www.reimag.co.za

Property24 Offshore Handbook 2013

AFRICA

BY ANGIE REDMOND

Living The Life In Seychelles

raditionally, the Seychelles islands have been experienced exciting revitalisation in the area of promoted as idyllic holiday destinations investment and finance. rather than hot spots for lucrative property investments. However, the past few years have Investment – Chief executive of the Seychelles seen a remarkable shift in perception. Real estate Investment Bureau, Sherin Renaud, has been in Seychelles is now increasingly sought after by quoted saying: “Our ultimate vision is to become private buyers, long-term tenants and developers the investment centre of the world.” As ambitious alike. This once sleepy island paradise – known for as that sounds, the country is already set to take a its holiday property - has grown leap forward in communications into a bustling hub of industry with the completion of the fibreSEYCHELLES and tourism. optic submarine cable. This will provide a link between Seychelles Recently, Seychelles embraced to mainland Africa, enhancing the creation of its 116th island telecommunications and providing – the Eden Island lu xur y improved Internet stability and marina estate. This ambitious speed. Additionally, the discovery of development saw a mass of land, offshore oil and gas is contributing ov e r 56 he c t a r e s , r e c l a i me d to the modernisation of all port f r o m t h e o c e a n . Fe a t u r i n g • Population: 86 000 facilities. waterways, private beaches and • Language: French / English an international marina, Eden • Currency: Seychellois Rupee Finance – There has been an increase Island is fast becoming known as • Main Export: Cinnamon / in focus on the offshore financial Vanilla & Copra sector, marked by plans to create the archipelago’s ideal location f o r p r o p e r t y i n v e s t m e nt s . I f • Capital City: Victoria a stock and securities exchange you’re interested in real estate in • Inflation: 5.3% that allows the listing of foreign Seychelles but aren’t completely companies. The government has also convinced that the country is the best place for you indicated that they will pass the Legal Practitioners to invest in property, read on. Act, making it legal for foreign lawyers to practice The Seychelles revival While an increase in foreign interest, largely due to Eden Island, has heralded a new era for the countr y’s real estate, Seychelles has also 50

Offshore Handbook 2013

here. This is good news for investors channelling money into Seychelles who want a foreign law firm presence in the country.

RESOURCES

Eden Island www.reimag.co.za

AFRICA

BY GAYE DE VILLIERS

New Economic Gains In Zambia

ambia’s real estate sector is on course for drawn expansion plan across all cities and towns but growth, says Inutu Zaloumis, Managing recent moves by the Zambian government to address Director of Pam Golding Properties this are posed to stimulate further growth of the real Zambia. “Zambia is widely tipped to record sustained estate sector.” economic growth of approximately seven percent over the next few years, but the manner in which Zaloumis says increased investments from major the country’s real estate sector is transforming the economies such as China, South Africa and the face of the nation is as good as United States as well as sustained any barometer for the economic investment in the mining and ZAMBIA turnaround currently underway. agriculture sectors are ensuring A lt ho u g h e c onom ic g r o w t h that the demand for residential, softened somewhat from 2010 at commercial as well as industrial 7.6 percent, it remained efficient at prop er t y i s on t he up s w i n g. 6.6 percent year in year out in 2011 The capital city has seen steady as growth was underpinned largely investment in both the retail and by agriculture, manufacturing, commercial sector in the last five construction and transport. This years and while this may be on the year, Zambia is set to benefit from decline in Lusaka, other towns and • Population: 13.5 million the $700 million Eurobond, which cities are opening up for similar • Language: English will be used for infrastructure investments. • Currency: Zambian Kwacha development across the country. • Main Export: Copper Cathodes “One of the major projects currently • Capital City: Lusaka “Steady year-on-year economic under way includes the US$100 •Inflation: 6.4% growth and investment in the real million redevelopment of Society estate sector have resulted in the House in the capital city’s centre. creation of jobs, increased access to housing, retail, Sitting imposingly in the hub of Lusaka, Society commercial and industrial property as well as an House is set for a major refurbishment that, once increase in foreign direct investment for a forwardcomplete in 2014, will set the tone for regeneration moving economy and real estate sector. There are still of the capital city’s skyline. The redesign of Society challenges in the implementation of a deliberate, wellHouse, which will see it comprise a 160-room fourwww.reimag.co.za

Offshore Handbook 2013

AFRICA star Holiday Inn hotel, conferencing, office space, a retail mall and a 1 100 car parking garage. The building will have 8 000 square metres of retail space coupled with 6 000 square metres of office space, putting it right at the pulse of the city centre. She says in Lusaka, the development of Roma Park is underway and looks to establish a new blueprint for economic, social and infrastructure growth in Zambia. At project maturity, the development will exceed US $100 million in investments. Launched in 2011, the 217 acre development is a mixeduse development that encompasses residential, commercial and industrial properties, including a shopping centre, big-box retail space, restaurant and conferencing facilities, warehousing, manufacturing and office space. “This growth in the real estate sector is not restricted to the capital city. There is significant investment going into the North-Western Province which will see approximately 3 500 new residential units developed as investors such as First Quantum Minerals invest further into their mining operations in the province. With many projects either under construction or still being planned, annual copper production is estimated to reach 1.5 million tonnes within the next four years. Projects in the formative stage include Konkola Deep Mine, Mindola Synchlinorium, the Chambishi South ore body, and the US$1-billion Kalumbila Mine run by First Quantum Minerals. Others are Lumwana and Chambishi mines and the Kansanshi Copper Smelter. These investments will spill into the development of retail, commercial and industrial real estate as the province looks to provide a self-sustained economy for its population. “There is likely to be increased interest in the commercial sector on the Copperbelt and North-Western provinces due to the existing absence of structured retail property and as a result of the economic growth registered in other parts of the country. Areas such as the Copperbelt and NorthWestern provinces still have not been heavily invested 52

Offshore Handbook 2013

into when it comes to retail and commercial property and Zambia is seeing these as two key growth areas for the local real estate sector in 2012 going into 2013.” Adds Zaloumis: “In 2012, Lusaka’s retail and commercial sector saw a total of 33 000 square metres of retail built with office space at approximately 10 000 square metres including the developments along Thabo Mbek i Road and Addis Ababa Roundabout. These developments have been a timely response to the absence of office parks and structured retail space in the country. While there has certainly been growth in Lusaka with a number of shopping complexes and office blocks being developed but in 2012, Lusaka does not expect as much growth as the last few years due to a large portion of the demand having being met already. However as other parts of the country begin to open up; the growth of the property sector will continue to rise. “Despite Zambia’s significant strides in the real estate sector, there still remains a gap between the demand and actual supply of structured retail and office complexes in the country. The population in Zambia was reported at 11.97 million people in 2009, according to the International Monetary Fund (IMF). In 2015, Zambia’s population is expected to be 13.57 million people. This, coupled with consistent investments into the country, poses a challenge to developers as demand and the need for structured residential estates will increase on the back of population growth. “From an investment perspective, in Zambia, the return on investment for property is around 7% to

11%, and the capital appreciation has slowed down from 10% to around 5%. The price for houses has remained f lat in Lusaka, but land prices are still appreciating. Interest rates have come down from 20% to 17%,” says Zaloumis.

RESOURCES Pam Golding www.reimag.co.za

Roma Park provides investment opportunities Residential Estates Shopping Malls Value Retail Lifestyle and Luxury Centre Commercial Park and OďŹ&#x192;ce Blocks Light Industrial Local Business Manufacturing Centres Warehousing Roma Park is an unprecedented opportunity to invest in Lusaka, Zambia, one of Africaâ&#x20AC;&#x2122;s fastest developing urbanised cities!

AFRICA

BY ANGIE REDMOND

Where Are The Property Markets

In Zimbabwe?

imbabwe is home to the Victoria Falls, one doubtful in an environment of weak consumer spending. of the natural wonders of the world, the The Mall of Zimbabwe, a major new development with stone enclosures of Great 68 000 sq m of retail space, is due to see Zimbabwe - remnants of a past construction commence in early 2013, ZIMBABWE empire - and to herds of elephant and with completion slated for 2014. other game roaming vast stretches of wilderness. It is also, slowly, on the Industrial market road to recovery economically, despite Demand for industrial space has many challenges, but where are the reduced in recent years, as Zimbabwe opportunities? has become more of a consumer of imported goods than a manufacturing Office market country. Vacancies are increasing The take-up of office space has been • Population: 12.8 million and rents are depressed. Tenant poor as a result of the depressed • Language: English / Shona viability is questionable in the current & Ndebele economic climate in Zimbabwe. difficult economy, putting at risk the • Currency: Dollar & Rand Occupiers are struggling to meet rent security of income streams. Industrial • Main Export: Tobacco and service charges, and the levels of investments are considered the least • Capital City: Harare arrears are generally high. Vacancies attractive of all sectors and the recent • Inflation: 5% have increased, in some buildings to sales that have taken place have been over 30%. More than a year after it entirely for owner-occupation. came on stream, the 12 000 sq m of office space in the Joina City development in Harare remains over 50% Residential market unlet. Two significant office developments, the Celestial The absence of long-term mortgage/loan financing has Park and the Old Mutual project, with a combined restricted residential market activity. Some financial lettable area of 26 000 sq m, are currently underway institutions have been able to secure external lines of along Borrowdale Road and should be completed within the next twelve months.

Retail market Retail space remains in high demand, both in the CBD and suburban locations. There has been an uplift in retail prime rents for new lettings in Harare of about 60% during 2012, but the sustainability of the achieved rents is 54

Offshore Handbook 2013

credit to support mortgages for private purchases, but the secured loans have been for relatively small amounts over short periods, eg 10 years at rates of 15-18% per annum, thus making them expensive for borrowers. Nevertheless, the market has seen price increases of up to 25% during 2012.

RESOURCES

Bulawayo News www.reimag.co.za

AFRICA

BY GAYE DE VILLIERS

Meet Mauritius Embrace the island style

Population: 1 250 000. Language: English (official) although the English is Creole English; French, Hindi, Urdu. Capital City: Port-Louis (pop. 140 000)

The climate is humid and subtropical with considerable v a r iat ion bet ween w inter a nd summer. Most rain fa l ls during the summer months, November to March. Mauritius lies within the Indian cyclone belt.

â&#x20AC;&#x153;Finding the right location for a leisure property where you can enjoy holidays for many years to come â&#x20AC;&#x201C; with instant access to a broad range of activities and amenities to delight every member of the family, is a priority for many buyers. Affordability is of course another key factor and the new phase of residences at Anahita resort in Mauritius meets all these criteria, at prices within reach of a wider crosssection of home buyers and with a host of activities and facilities ready to be enjoyed the moment you

auritius is situated 800 kms east of Madagascar and comprises the main island and twenty adjacent islets. It has a land total of 1 800 sq km. The island of Mauritius is volcanic in origin, fringed by coral reefs. The dry, lowland coast has mangrove swamps and wooded savannah with abundant lagoons and sandy beaches. Over 40% of the population inhabit the western urban strip.

Offshore Handbook 2013

www.reimag.co.za

move in. Previously, the average price of property achieved in this luxurious resort was in the region of â&#x201A;Ź1.3 million, making the new phase of residences very appealing,â&#x20AC;? says Dr Andrew Golding, CE of the Pam Golding Property group. Factors such as residency and an attractive tax regime have made Mauritius rather resilient to the dip the rest of the world experienced from 2008 in the property market. With limited land available for development, the next few years will see a shortage of stock, so the property market in Mauritius is set to remain strong. Infrastructure is continuously being developed and upgraded, the road network is improving and tourists and

www.reimag.co.za

owners will be able to reach Grand Baie, a popular tourist region, without going through Port Louis. Developments are increasingly becoming green, a critical element in a developing environment. A new airport is being built and this will increase tourism and a large increase in the retail environment has seen South African retail businesses entering the Mauritian market. Mauritius has always had a conservative banking environment, which has proven in its favour. With tax rates of 15 percent onshore and between 0-3 percent for offshore investments and no capital gains/dividend taxes, there is a continued increase in families looking to relocate there.

Offshore Handbook 2013

AFRICA Opportunities for investment Familiar brands such as Woolworths, Pick ‘n Pay,

centre, well-being and f itness centres, f loodlit tennis courts, children’s and teen’s clubs, boutiques

At ‘Anahita Mauritius’, an Integrated Resort Scheme on six kilometres of shoreline along the

Mauritius offers a diverse range of attractive options for investors and the property

Nando’s and many others allow South Africans to and shops and a full concierge service. feel at home. “We find that the developments we market also have many permanent residents and The latest development phase is located in a with the recently launched Le Parc neighbourhood named ‘Amalthea’ de Mont Choisy, we anticipate and comprises MAURITIUS around 40 percent of the owners 4 0 t wo- and t h ree-bed room will be residents, and its central lodges priced from €490 000, 12 location in the heart of Grand two- and three-bedroom duplexes Baie makes it ideally located for priced from €630 0 0 0, and 11 foreigners. The Le Parc de Mont three-bedroom villas priced from Choisy estate has a beautif u l €790 000. The units range in size 3.2km white sand beach and with from 147 to 201 square metres and 1200 acres of land so well located are sold on a freehold ownership and with golf, beach and a country basis. All the residential units are club with gyms, pools, spas and • Population: 1.3 million located within a pedestrianised children’s facilities, will be ideal • Language: French and landscaped neighbourhood for a family holiday, retirees and • Currency: Mauritian Rupee accessible only by golf cart and those wanting to relocate now or • Main Export: Tuna bordered by the first, eighth and • Capital City: Port Louis in the future,” says Golding. ninth holes of the golf course. •Inflation: 4.5%

largest lagoon in Mauritius, a new phase of luxury villas, lodges and duplexes have been launched. Inaugurated in June 2008, 213-hectare Anahita is located in Beau Champ, on the east coast of the island, offering a wide variety of recreational, cultural and social activities readily available and with over 200 residential units already sold and developed. Anahita includes the Four Seasons Resort Mauritius with spectacular views over an extensive lagoon and its own private island, an 18-hole Ernie Els signature golf course with a clubhouse, a double infinity edge swimming pool adjacent to the beach, seven restaurants, yacht club with various water sport activ ities, PA DI div ing 58

Offshore Handbook 2013

market is set to continue growing from strength to strength.

RESOURCES Pam Golding www.reimag.co.za

FINANCE

BY ANDREW RISSIK

If You Want Better Than Your Bank

Donâ&#x20AC;&#x2122;t use your bank

e live in a world of free markets and vast choice. However, many people continue to tolerate sub-standard service, extortionate fees and costly consequences of delayed transactions when using their banks to transfer funds internationally. When investing offshore you want as much of your hard-earned cash to arrive on the other side when making an international money transfer. Currency transfers, FX, Forex, foreign exchange, international money transfers, you name it contrary to popular belief - really are very simple to execute. Because there is a buy and a sell price, separated by what we call margin or spread, it may 60

Offshore Handbook 2013

seem complicated to the average person in the street. Money, like anything else traded, is a commodity that has a varying price tag depending on supply and demand. The USD is currently the base currency against which all other currencies are valued, so the ZAR/GBP rate will tie back behind the scenes to the relative value of each of these currencies against the USD. Exchange rates quoted on websites and in the media are typically the interbank rates and these represent the mid-market point between the buy and sell prices of the relevant currency pair. So the first lesson to note is that you will never get the rate you see quoted in the media. The market is also moving continually, therefore, the rate you heard on the radio www.reimag.co.za

whilst driving to work can - and most likely will be - very different when you decide to make a currency purchase during your lunch break. There are 3 important elements to any transaction. They are cost, expertise and customer service. How to beat the bank? Simple answer, don’t use the bank, use a forex brokerage. So why use us and not the bank? Better rates than the banks. We buy large volumes of currency and like any commodity we get a big price advantage. We take a smaller margin than the bank, which means big savings for you, the customer, and hopefully an increase in loyal customers result for us. Expertise In a world of instant access, you do not want to wait 10 days before your money lands in the beneficiary’s bank www.reimag.co.za

account. We know the systems and all we do is process foreign currency transfers and guarantee cleared funds within two working days, it’s that simple. In the South African scenario, where we have a very complex exchange control framework, our skilled consultants have all the answers to the questions that may have been left unanswered by your local bank. Customer service Our consultants do one thing only, and that is to trade and process international money transfers. They are quick, efficient and very friendly. The most important aspect of service is how we deal with a mistake when we make one; after all we are only human. Our business growth is highly dependent on repeat business and referrals, so we don’t leave customer service to chance. So next time you or your business needs to make an international payment that is simple, secure and fast; please use Sable FX. You will enjoy the experience.

RESOURCES Sable Group Offshore Handbook 2013

LEGAL MOVES

BY ALEXANDRA BURGER

Protect Your Assets

Know the law before you invest

nternational property investments should be considered in light of both the needs of the investor and the situation of the property.

From the investors perspective a number of factors

should be considered: where are they tax resident, are they natural persons or juristic persons and most 62

Offshore Handbook 2013

importantly what is the nature of the desired return from the investment ie are they looking for income, capital returns, dividends or distributions from a property fund. Is the investorâ&#x20AC;&#x2122;s intention to develop or hold property for the long term to receive rental income (and capital www.reimag.co.za

WHAT IF THERE WAS A WAY THAT YOU COULD TAKE THE RISK OUT OF RESIDENTIAL PROPERTY LETTING? Today, some 2.3 million people rent property in South Africa. There is huge potential in the rental property market – but every landlord or estate agent will tell you that there are also risks associated with letting residential property.

What if there was a way that you could take all the legwork out of the letting process, and alleviate the risks at the same time? Rentshield has introduced a new, first-to-market, “zero deposit” residential letting tool that helps landlords and estate agents manage their property portfolios more efficiently and effectively.

Benefits to landlords: •

Eviction costs: Rentshield covers legal costs up to R50 000 for the eviction of a nonpaying tenant. They also manage the eviction process.

•

Loss of rental income due to eviction: In line with the Consumer Protection Act, tenant eviction is a lengthy process, often taking as long as three months. Rentshield protects the landlord against loss of income during this time, offering coverage of up to three month’s rent.

•

Loss of rental income due to absconding tenant: In the event of a tenant absconding from the property before the stipulated rental period is complete, Rentshield will cover up to one month’s rent.

•

Unpaid accounts and malicious damage: Utilities payable by the tenant that are in arrears, such as electrical bills, as well as malicious damage caused to the property by the tenant, will be covered by Rentshield up to a combined amount of one month’s rent.

•

Damages caused to property: Rentshield will cover up to one month’s rent for damages to the property caused by the tenant.

•

Peace of mind: You can rest assured that Rentshield will take care of all the legwork associated with property letting.

The cost of Rentshield is included in the total monthly rental paid by the tenant. To qualify, tenants must be South African citizens and be able to afford the rent. All leases protected by Rentshield must be a minimum of 12 months.

For more information, visit: www.rentshield.co.za or call 0861 DEPOST / 0861 376748.

LEGAL MOVES appreciation over the long run)? Or is the intention to trade the property in the short term to make capital

Taxation is, of course, a primary concern and advice should be sought in the country in which

Fees are an important aspect to consider, whether these are legal fees on acquisitions, or lending and property management costs. The costs of a suitable property holding structure eg a trust and/or a company or similar vehicle are important. Funds could result in layering of fees and itâ&#x20AC;&#x2122;s essential to ask about all the fees from upfront to ongoing fees, any performance fees and fees on exit.

The income could also be in the form of dividends or other distributions and these may attract withholding ta xes which means the holding structure should, if possible, be in a jurisdiction which has the relevant double taxation treaties to reduce the withholding tax.

gains and possibly rental income? Alternatively, is the investor looking to invest in a collective investment scheme, some of these may be readily tradeable and others can be in closed ended structures ie the investment is locked in for a number of years (for example five years).

A ll collective investment /pooling schemes marketed to the general public should be regulated and sold through promoters with appropriate licensing. Certain countries eg Australia blacklist particular

offshore jurisdictions. Effectively this means one should not endeavor to hold property through a company in this jurisdiction. In practice there will be many options for holding vehicles and issues such as cost, long-term estate planning, and asset protection will play a role in choosing both a structure and a jurisdiction. There is a plethora of different structuring options including, for example, trusts, limited liability companies, limited partnerships, property unit trusts, segregated portfolio companies to name a few and a whole host of collective investment schemes. Generally, one should stick with a tried and trusted structure for the country in which the property is situated.

Offshore Handbook 2013

the property is situated. Each country (and certain states within, for example, the USA) have different treatment of taxation on property rentals. In some countries there are advantages to being a nonresident holding property, eg in the UK one can apply for Non-Resident Landlord status.

Disposing of the asset will most likely result in capital gains tax (or income tax) and there may be other duties payable locally. If one is trading in property, income tax could be payable. The various collective investment scheme options should advise the taxation payable both on distributions and on redeeming the assets. Generally if one holds foreign shares for five years or more, capital gains rather than income tax will be applicable.

Real Estate Investment Trust (â&#x20AC;&#x153;REITsâ&#x20AC;?) are a popular way to invest in property because they are readily tradeable and standardised worldwide. REITs have their own particular tax treatment. Please note that when owning property in your name in certain countries, you may be subject to estate duty at the local rate. For example, in the UK, when one owns UK situs assets in excess of a certain amount, UK estate duty at 40% would be payable (which is far in excess of SA estate duty levied at 20%).

RESOURCES Amicorp

www.reimag.co.za

International Money Transfers Sable FX specialises in foreign exchange and international remittance. We will help you negotiate the regulatory minefields and assist you with sending money to and from every major global destination, in line with exchange control regulations and Reserve Bank rules.

Why use Sable FX: Worldwide transfers No transfer fees Better exchange rates than what your bank can offer you Regulatory form advice and completion SA tax assistance Secure online payment portal Unrivalled customer service

Sable FX United Kingdom Castlewood House 77/91 New Oxford Street London WC1A 1DG t: +44 (0) 808 141 5535 info@sable-group.com www.sable-group.com/forex

South Africa Regent Square, Block B1 Doncaster Road Kenilworth 7708 t: +27 (0) 21 657 2153 info@sable-group.com www.sable-group.com/forex

Sable Forex is a Money Service Business registered with Customs and Excise. Registration No. 12148630

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