Real Estate Investor Magazine South Africa March/April 2019 | Page 58

WEALTH MANAGEMENT
A little place by the sea
Wealthy capitalise on strong property growth
offered by second passport countries
A
side from benefits such as freedom of travel and ease of
access to international markets that a second passport
offers for wealthy South Africans, Ms Nadia Read
Thaele, Director of LIO Global, a specialist firm in Residence
and Citizenship by investment programs, says many of these
programs offer attractive property investments with good cap-
ital value retention, a currency hedge as well as growth.
 Due to current politico-economic climate in the country
and somewhat weak property market, she says that there has
been a notable uptick in demand for these programs from
those who can afford it. Eurozone countries such as Malta and
Portugal are especially sought after, but many are also opting
for the Caribbean programs which offer a more affordable and
simpler solution, but still give the benefit of visa-free access to
the UK and Schengen countries, and in the case of Grenada,
China as well.
Who would not want to own a villa or apartment in Malta
or Portugal, or an idyllic island escape in Cyprus or the
Caribbean? In most cases, you are required to spend little or
no real time there but can of course use these as your exotic
holiday getaways.
You can also rent out your property when not in use and
earn attractive rental yields of 4% to 7% depending on the
destination. These countries have enjoyed some of the best
capital value growth rates of anything upwards of 5% to 9%
during the last year, independent of the currency hedge.
Overall, says Ms Read Thaele, there is a rising trend globally
of wealthy people from countries with limited mobility
passports ‘buying’ second passports in the form of a second
citizenship or residency. A  www.macaubusiness.com  report
points out that investment into Portugal›s ‹golden visa› for
example rose notably last year, and since inception 6,687
applications have been granted (11,370 residence permits
inclusive of family members).
The Malta Chamber of Business portal (www.maltachamber.
org.mt) also reports a notable uptick in demand for citizenship
which, according to a Eurostat report, rose by 131%, and the
56
MARCH/APRIL 2019 SA Real Estate Investor Magazine
country’s popularity is outranked only by Croatia and Greece
(see www.maltachamber.org.mt).
She notes further that buying property as part of the
investment programs, adds to the attraction for many. Some
countries only need you to hold onto the property for around 3
to 5 years, thereafter you can sell, however residency programs
generally require you to keep your investment/property in
order to maintain and renew residency status. Most of the
countries offer favourable tax regimes and incentives with no
property taxes and full repatriation of your profits and rental
income. Capital may need to be reinvested in certain instances.
The weak domestic economic growth and confidence
compounded by real house prices which are actually in decline
when adjusted for inflation, has motivated many wealthy SA
buyers to put less money into local property and more into
offshore assets including property, she says.
Compared to SA prices in some regions growing at around
3% to 4% annually at best (before adjustment for inflation), the
Caribbean destinations have seen growth of 4% to 6%. While
the Eurozone and EU achieved average growth of 4.3% last
year, Portugal achieved 11.2%, Malta 5.7% and Cyprus 4%
(apartments).
Additionally, she adds, South Africans are also likely to
benefit from fluctuation in the value of the Rand against major
currencies such as the Euro and US dollar. On a property
investment of R8 million, a 5%-10% devaluation of the rand
can for example add an additional R400,000 to R800,000 in
wealth.
Comparatively, says Ms Read Thaele, many clients have
commented that luxury property on the Atlantic Seaboard has
seen virtually no growth over the last year and rental yields
have declined to around 3% to 4%.
Investing in a second passport provides a range of benefits,
and you generally get to enjoy all of the benefits of being a
resident or citizen of the country including; freedom of
mobility, or to work, live and do business in the country itself
as well as the region such as the Eurozone in the case of