London, New York, Hong Kong, Dubai. Africa’s super-wealthy have long chosen to make high-end property investments in major global cities which are prized for their quality infrastructure, stability and long-term investment credentials.
Property is a firm favourite with African investors, be they billionaires or among the growing number of millionaires emerging from across the continent. Fuelled by this growing demand, the process of adding bricks and mortar real estate assets to a robust wealth portfolio has never been easier, while professional management services provide the necessary day-to-day support.
Carrick Property work with individual clients around the world who are looking for direct residential assets as part of their offshore portfolios. The appeal of an offering like ours is that every aspect of the property investment process is managed on the buyer’s behalf, from appointing conveyancing lawyers and obtaining a mortgage, to securing a tenant, managing the rental process and, when the time is right, helping with the resale of the property.
Cutting out the hassle of being a hands-on landlord has increased the lustre of offshore property investment for wealthy Africans looking to own a foreign asset offshore without having to oversee the process and get involved in the nitty-gritty.
That said, being aware of the challenges and trends in the property market of your choice is always advisable; particularly during tumultuous times.
Changes to watch
For instance, if you are seeking exposure to the Portuguese property market as a way to securing a popular Golden Visa, it’s important to know that from January 2022 new rules will mean that purchases in greater Lisbon, Porto and many popular coastal areas will no longer be on the table. Instead, the focus is turning to less-densely populated areas where rental yields are likely to be lower. So seeking advice about location before making a purchase is advisable.
Similarly, in the US, President Joe Biden is targeting a tax code that enables property investors to avoid paying capital gains taxes when selling a property, as long as they use the proceeds to buy another property. Does this have implications for your plans?
In the UK, where roughly a third of households rent and where mortgage costs make it more affordable to rent than buy, residential property investment is still an attractive proposition for wealthy offshore buyers. But in the near future these investors could be competing against big investment companies and pension funds that are turning their attention to the residential market by building build-to-rent blocks, which only allow rentals.
The Guardian newspaper reported in July 2021 that John Lewis, the retail store and owner of the Waitrose supermarkets and high-end John Lewis stores, had identified excess space on land owned by the company to build some 7 000 homes in the coming years. In an attempt to buoy its flagging fortunes in the wake of Covid-19, John Lewis’s focus is keenly on the build-to-rent sector.
Over and above these country-specific considerations, there are also trends around tenant requirements to consider. “The pandemic has heightened the popularity of gardens and home studies, for instance, as well as renting in multi-use developments where Wi-Fi is available and where some remote work amenities, such as shared office space, could be on offer,” says Scott Irving, General Manager, Carrick Property.
How are you managing?
Access to professionals with deep market knowledge is invaluable no matter where you invest, but the decision of how to deal with the daily ins and outs of managing an offshore property largely come down to two important questions:
- Am I able to deal with the day-to-day process myself, or would I prefer to be hands-off?
- Am I au fait enough with the rules and regulations in the country of purchase to adequately protect myself against possible legal issues?
“In our experience, most wealthy African investors prefer to entrust the process to a managing agent who can advise, based on the specific requirements of the country in question, the best course of action when it comes to things like insurance requirements and mandatory certifications, as well as undertaking tenant checks, collecting rents and ensuring all mandatory requirements on the part of the landlord are being undertaken,” says Irving. But this service comes at a cost.
“In the UK, for example, management fees come in at around 10%,” says Irving. “So, you can choose to manage the property yourself and take that saving, but that does mean dealing with the daily stressors of renting.”
He adds that it is also possible to use an agent to find tenants and then take over managing the account yourself.
Whichever way you turn, Irving advises always treating your offshore property investment as a long-term business. “This means working with top professionals, ensuring your property is well-maintained and marketed, and that you offer value in a crowded market.”