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Johannesburg - The strong rand, historically low international property prices and relaxed exchange controls have combined to make this a good time for South African investors to look overseas to diversify their property portfolios.
According to Eric Fisher, director of Stonehage Property Partners in London, there are good opportunities to invest in various classes of property abroad.
"With prices significantly down from their highs and property markets in many countries at an inflection point, foreign property purchases continue to be an effective hedge against currency risks."
Bernie Herberg, a director at Stonehage Financial Services, noted that South African residents can now apply to the South African Reserve Bank's (Sarb's) surveillance department for permission to invest in a holiday home or farm in any country which is part of the Southern African Development Community (which includes Angola, Botswana, Congo, Madagascar, Malawi, Mauritius, Mozambique, Seychelles, Tanzania, Zambia and Zimbabwe), or to acquire any other investment property abroad.
"Should the application be successful, individuals do not have to avail themselves of their foreign investment allowance for this purpose," he said.
But the Sarb could place certain restrictions on these purchases.
The proceeds on disposal of the property and any net rentals earned during the currency of the investment must be remitted to SA.
Rental income will be subject to tax and capital gains tax may be payable on disposal of the property. The property will also fall into the investor's South African estate for estate duty purposes.
"Aside from potential good value, certain of the Sadc countries like Mauritius and Seychelles have an added attraction for South African investors, because residence is offered where property is acquired through certain approved projects," Herberg said.
"Should South African resident individuals not wish to make special application to Sarb they will need to utilise their R4m foreign investment allowance to part-finance these acquisitions, and fund the balance of the purchase price of the property with a foreign mortgage without recourse to South African assets."
The profit on sale of the property will be subject to capital gains tax, unless the property is acquired through an offshore vehicle that has been correctly structured for South African tax purposes.
The proceeds can remain offshore, but there may also be estate duty implications for the investor depending on how the property is held offshore.
Fisher says that international property investing will require both a specific geographical and sectoral approach in the current "low capital growth" market.
"The US, UK and Europe are still in the midst of a major deleveraging cycle with the banking sector dictating the outlook for the coming years.
"This will be based on the pace of refinancing and release of 'distressed opportunities' either directly or indirectly onto the market. Cash-rich equity investors with the ability to close deals will be the winners."
He added that secure income will be the key factor in an environment where property yields will continue to be significantly higher than cash deposits.
"Investors should remain cautious about excessive leverage to ensure they're able to weather any further turbulence.
"Prime residential properties have outperformed and, in the case of London, this could well continue," he said.
According to Eric Fisher, director of Stonehage Property Partners in London, there are good opportunities to invest in various classes of property abroad.
"With prices significantly down from their highs and property markets in many countries at an inflection point, foreign property purchases continue to be an effective hedge against currency risks."
Bernie Herberg, a director at Stonehage Financial Services, noted that South African residents can now apply to the South African Reserve Bank's (Sarb's) surveillance department for permission to invest in a holiday home or farm in any country which is part of the Southern African Development Community (which includes Angola, Botswana, Congo, Madagascar, Malawi, Mauritius, Mozambique, Seychelles, Tanzania, Zambia and Zimbabwe), or to acquire any other investment property abroad.
"Should the application be successful, individuals do not have to avail themselves of their foreign investment allowance for this purpose," he said.
But the Sarb could place certain restrictions on these purchases.
The proceeds on disposal of the property and any net rentals earned during the currency of the investment must be remitted to SA.
Rental income will be subject to tax and capital gains tax may be payable on disposal of the property. The property will also fall into the investor's South African estate for estate duty purposes.
"Aside from potential good value, certain of the Sadc countries like Mauritius and Seychelles have an added attraction for South African investors, because residence is offered where property is acquired through certain approved projects," Herberg said.
"Should South African resident individuals not wish to make special application to Sarb they will need to utilise their R4m foreign investment allowance to part-finance these acquisitions, and fund the balance of the purchase price of the property with a foreign mortgage without recourse to South African assets."
The profit on sale of the property will be subject to capital gains tax, unless the property is acquired through an offshore vehicle that has been correctly structured for South African tax purposes.
The proceeds can remain offshore, but there may also be estate duty implications for the investor depending on how the property is held offshore.
Fisher says that international property investing will require both a specific geographical and sectoral approach in the current "low capital growth" market.
"The US, UK and Europe are still in the midst of a major deleveraging cycle with the banking sector dictating the outlook for the coming years.
"This will be based on the pace of refinancing and release of 'distressed opportunities' either directly or indirectly onto the market. Cash-rich equity investors with the ability to close deals will be the winners."
He added that secure income will be the key factor in an environment where property yields will continue to be significantly higher than cash deposits.
"Investors should remain cautious about excessive leverage to ensure they're able to weather any further turbulence.
"Prime residential properties have outperformed and, in the case of London, this could well continue," he said.
