Firm rand spurs interest in offshore property

The firmer rand has provided impetus for South Africans to buy offshore properties in an attempt to diversify their investment portfolios, say property agents.

Chris Immelman, MD of Pam Golding Property (PGP) group's International Division, says buy-to-let residential property investors have snapped up prime located London apartments, with all 21 apartments in Trinity Place in south-west London taken up by both UK and South African buyers.

The price of the units ranged from GBP245 000 to GBP350 000 for brand new one and two-bedroom units.

Ted Frazer, national marketing manager with Seeff Properties, agrees that there appears to be a greater interest from South Africans looking to invest in properties offshore.

Frazer says this interest is due to a combination of a number of key factors, most notably the stronger rand and people opting for more diversified investment portfolios, "feeling that they perhaps shouldn't have all the proverbial eggs in one basket".

"The question that needs to be asked when investing offshore is: Does one invest in fixed property - which requires hands-on involvement? Or, does one do it by means of a more passive investment vehicle such as the offshore stock markets? Generally, we have found that

South Africans often choose between either buying commercial property directly, or by syndication or via the listed property funds overseas," Frazer says.

Frazer adds there are certain investors who are looking to purchase with a view to ultimately owning a home overseas and while "we haven't seen a major growth in this field, with the overseas allowance now set at four million rand per individual we believe the trend will increase provided the rand remains strong".

Immelman says all the purchases received from the London market were for investment purposes as investors sought to diversify their investment portfolios and externalise some of their foreign exchange allowance.

"They grasped the opportunity to capitalise on the strength of the rand and the excellent value the properties offer in the current London market," Immelman says.

However, Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, says the number of SA citizens investing abroad is relatively low at this stage.

"While there is certainly value to be had in acquiring property abroad at the moment, acquiring

finance - albeit at very low interest rates - is very limiting. Most of these transactions are cash deals. This means that the potential number of deals is dramatically curtailed," he says.

Goslett explains that it will take some time still before house prices in the US and most parts of Europe begin to see any significant increase, "which means that if you invest now, you have to be willing to 'sweat it out' for a few years before seeing a return", he says.

Goslett says there are unconfirmed rumours of large SA corporations assessing opportunities of investing abroad.

In stable economies such as Canada, syndicates and larger companies have seen value in the US and have bought up vast amounts of residential property in distress from the banks, which they then manage and in time will turn for a profit.

"I think that while the interest rates in SA are the lowest they've ever been, South Africans will be more inclined to seek value in SA. Our property market is much more stable than the regions mentioned above and our economy, specifically the banking sector is also much healthier," Goslett says.

Source: I-Net Bridge