Rawson advises investors to stay with the local market
Bill Rawson, Chairman of Rawson Properties, has added his voice to those of several high profile commentators who have urged South African investors to be cautious about taking advantage of the increased offshore investment allowance especially if they are contemplating property investments.
The SA Reserve Bank recently announced that up to R4 million per person can now be invested overseas by South Africans.
This, Rawson believes, is a calculated move to weaken the rand against foreign currencies, discourage imports, enhance export earnings and attract foreign investment.
All sorts of difficulties, says Rawson, crop up on foreign property buys and even the best SA lawyers are not always aware of these.
To take just one example, the conditions under which mortgage bonds are issued may be different from those in South Africa: certain foreign banks limit the term of their bonds to relatively short periods after which they reserve the right to alter the interest rate. Some countries actively deter foreign property ownership and make it exceptionally costly. The Capital Gains Tax for foreigners can be prohibitively high and any lack of documentation or mistakes in documents can result in huge penalties and delays. SA is actually ahead of the pack in facilitating home ownership.
Rawson warned, too, that neither the capital appreciation growth rates nor the return on investments overseas are likely to be as high as in SA.
Commercial property here is still giving an average return of 8,5% and residential returns are around 5 to 6%. Listed companies like Redefine have again been able to lift their dividends and by the end of next year capital growth in property generally could average 9%. Prime CBD overseas property in London, Monaco and Brussels gives nowhere near returns of this magnitude because their returns are linked to their low interest rates and to local economies which for the next few years are unlikely to match the growth of the mineral-rich, cheap labour economies of the emerging world.
Foreign investors, said Rawson, can now be safely pointed in the direction of SA residential property, especially as the 2010 euphoria, although limited to a year or two, is already having an effect e.g. on rentals in homes close to stadia and in B & B bookings.
Right now, said Rawson, I would rate SA residential property along with that of Florida, USA, as two of the best investments an investor looking for a safe, secure, steadily appreciating asset can find. Both are coming off low bases, both have good climates and good tourist facilities as an additional attraction and both are known these days to the fast-growing international set who may own three or four homes, all in different countries.
Article by: www.rawsonproperties.com