Real Estate Investor Magazine South Africa June 2015 | Page 58

FINANCE Investing Internationally In Property Where to invest now BY KATE LEWIN T here is an interesting investment profile that South Africans have been lead into over the decades. Factors contributing to this profile start from days as early as 1652 when learned men and global traders washed ashore and invested everything into land and property development in the Cape of Goede Hoop. Legacy of this age was held onto dearly, iconized on tactile things such as stamps and coins right up to 1993. As blood spilled in 1960 Sharpeville massacre, so too did South Africa’s foreign exchange. Government attempted to restrict the damaging outflow of capital and an additional level of capital control bolstered in the dregs that remained. Residents were prohibited from removing capital from the country and foreign investors could only remove investments via the financial Rand, trading at 20% to 40% discount to the commercial Rand. The ambitious, who took the significant ZAR/US$ hit were caught in a grey area of then-illegal offshore investments, facilitated through trusts and other loophole investment platforms. The conservative investor remained in South Africa, building large property portfolios. Still to this day South Africans are more patriotic to their cherished property than any other asset class, even the nonpatriarchal. The floodgates on exchange control opened this year as the South African Reserve Bank (SARB) announced increases to private client limits with effect 56 JUNE 2015 SA Real Estate Investor from 1 April 2015. South African residents’ foreign investment allowances increased from R4 million to R10 million per calendar year, with an additional annual R1 million per calendar year out of the country for any legal purpose abroad (the R1 million discretionary allowance was removed). With recent political movements and the consistently declining and volatile Rand, many look to greener pastures. Now, more than ever, South African High-Net-Worth (HNW) investors remain South African residents but disinvest their portfolios leaving everything, apart from permanent residence, liquid for the offshore market/bolt-hole. “Locations in London still show particularly high potential for strong returns.” Statistics show that worldwide HNWs invest at least 37% of their wealth in globally diversified portfolios held in hard currencies. South African HNWs typically diversify geographically by less than 7%. According to a new report from IP Global, investors looking to diversify their portfolios for succession and retirement planning need not look further than the United Kingdom and Australian property market. Investors will benefit from exposure to fixed assets in www.reimag.co.za