More HNWI SAs turning to offshore property investment

28 May 2018

In order to mitigate the risk of fluctuations in domestic markets and to diversify their wealth portfolios, more and more of South Africa’s high-net-worth individuals (HNWIs) are looking to invest in offshore property.

HNWI

The South African Wealth Report 2018 shows the number of locals in this income band (total wealth of more than $1m) has increased by 8% in 2017. According to the report, published by New World Wealth, South African HNWIs held 17% of their wealth offshore compared to 13% in 2007, a figure which is forecast to rise to 22% by 2027.

“This increase is expected to be fuelled by larger allocations to foreign property, foreign cash, and foreign equities,” says George Radford, head of Africa at international property investment firm IP Global.

Radford says this widening segment of the population is interested in offshore investments that not only offer security and growth potential, but also tick several other boxes.

Economic powerhouse cities

“Ideal locations are economic powerhouse cities that offer a variety of lifestyle and leisure activities, great schools for high-net-worth individuals looking to relocate with their children, and a high influx of tourists for those investing in short-term rentals.”

An appealing destination for offshore investment from South Africa is Germany’s capital and largest city, Berlin.

In terms of stability, Germany has the largest economy in Europe and the fourth largest economy worldwide. According to the PwC Emerging Trends in European Real Estate 2018 report, Berlin ranks top in four important categories: investment and development prospects, expected increase in amount invested, expected increase in rents, and expected increase in capital values.

“Germany is a renowned safe haven for international capital, and the country has been a robust economic and political force in Europe in times of political uncertainty,” says Radford.

“For these reasons, Germany has become a primary destination for international investors worldwide, with inbound capital flows reaching record levels in March 2017.”

Investment in Berlin

Berlin has become the most prominent hub for innovation and enterprise in Europe and is ranked as one of the leading student cities in the world.

But the city’s housing market is undersupplied with a shortfall of at least 80,000 units in 2016. In the same year, the city’s population grew by 60,000. This demand and supply imbalance creates an attractive investment for those wanting to buy a property to let.

According to IP Global’s latest Global Real Estate Outlook (GREO) report, property prices in Berlin have increased by an average of 6.5% per annum since 2004.

Radford says that, overall, the figures show a low rental vacancy rate hovering around 1.2% in the city. “This has resulted in consistent levels of rental growth of 6.1% per annum on average since 2006.”

“All in all, this contributes to making Berlin an extremely sound offshore investment destination for South Africans with money to spend, as well as being a wonderful city in which to spend time, if that is the purpose of your investment,” he adds.

Other investment destinations

Berlin is not the only destination offering security, great returns and lifestyle benefits for South African investors. Radford says that Chicago, Birmingham, Liverpool, Manchester and London come highly recommended, while Hamburg and Dusseldorf are potential new markets for investors.

“Each city has its own appeal depending on an investor’s preference and needs. For high-net-worth individuals looking to invest offshore, the world is your oyster,” concludes Radford.

[This story first appeared on CyberProp.com]

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