South Africa’s property media regularly feature articles promoting overseas properties, but, says Bill Rawson, Chairman of the Rawson Property Group, he has never been particularly enthusiastic about this type of investment.
He has, he said recently, often looked into the possibility of investing in overseas property, especially at the time of the 2008/2010 global financial crisis when certain properties in Europe had been available at knockdown prices. However, he had always found himself coming back to the “many varied and often exciting” opportunities available in South Africa. Especially recently, said Rawson, innovative developers have been bringing really good projects to the market and the demand for these is now at an all-time high.
“The big arguments often put forward in favour of overseas property investment”, said Rawson, “are that the capital appreciation will be more or less assured and the investment will become particularly attractive if the rand continues to lose value or remains weak in relation to stronger currencies.”
“However, he said, the annual capital appreciation on these investments is often low, in the region of 3 or 4%, well below what South African property would give and I have often found that the rental return can also be very low. It is also worth noticing that many people are now predicting that the rand will, in fact, strengthen - say R8 or R9 to the US$ - as South Africa overcomes its infrastructure and energy supply problems.”
The desire to invest in overseas property, said Rawson, is in his view often the result of an exaggerated lack of faith in South Africa’s future.
“Looking objectively at South Africa today, its difficulties are not nearly as insurmountable as so many seem to think and are minor in comparison to those of many African states now achieving encouraging economic growth. Steps are being taken to overcome the matters that are holding the economy back. Couple this with the fact that many South African residential properties, both new and old, are giving excellent returns and the logic of continuing to invest here to me seems irrefutable.”
A further argument in favour of taking the South African rather than the international investment option, said Rawson, is that overseas property ownership can be – and often is – subject to “all sorts of complicated and unforeseen conditions”. In a wide variety of ways – death duties, Capital Gains Tax, local authorities tax and servicing charges – the overseas investment can be very different from the conditions applied to a similar property in South Africa and in certain cases there will always be concern in their owner’s mind that, not being on the spot, he could be missing a trick or two.
“Recently on one such investment in France it was found after several years that both the owner and the tenant had been paying the full agent’s fee and that the agent had fallen behind in paying the levies due. In another case the agent raised the rent but pocketed the increase himself and when appointing a contractor to carry out certain improvements and maintenance work, unbeknown to the owner, charged a massive commission on the deal. These sorts of things don’t on the whole happen in South Africa because here it is possible to keep a far closer scrutiny on dealings, which in any case are usually in English and therefore for most people more easily understood.”