The pros of offshore property investment for retirement savings - Finance, Advice
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The pros of offshore property investment for retirement savings

02 Jul 2018

When reviewing your retirement portfolio, it’s wise to consider all the available asset classes, including offshore property. The key, however, is to ensure you’ve done your homework and sought expert advice.

In South Africa, R11 million per person can be invested offshore - a R1 million discretionary and a R10 million non-discretionary allowance.

The economy and the rand have shown stability since President Cyril Ramaphosa took office. However, experts in the international property investment arena predict a potential two-year lag before South Africans see any real gains locally attributable to Ramaphosa’s leadership style.

“This ‘gap’ makes it an opportune time to take advantage of the steadier rand and to diversify offshore,” says George Radford, Head of Africa for IP Global.

Radford says buying offshore property presents double advantages of global growth due to appreciation in another currency, and passive income via rental yields.

This investment is best secured via a company with an end-to-end offshore property investment service, which should include, among others, an investment team, bond originators and a comprehensive lettings and property management team, Radford explains.

Plentiful perks

The advantages of offshore property, as an asset class, are extensive - especially for clients in Africa who often feel more comfortable with its stability and tangibility. Radford cites four other benefits:

  • Its ability to generate long-term wealth.
  • How it can be leveraged in tier one markets with historically low interest rates.
  • The exposure it allows to other currencies.
  • Higher levels of consumer protectionism in developed markets.

With 12 years of experience and global offices in Asia, the Middle East, Europe, Africa and most recently Mauritius, Radford says IP Global’s biggest market is the UK (London, Manchester, Birmingham, Liverpool and Leeds), followed by Germany as a close second (Berlin, Frankfurt, Dusseldorf), and lastly a burgeoning market in Portugal (Lisbon).

“I find the offshore property market incredibly exciting for its growth potential and passive-income generation within a retirement portfolio, as well as how well hedged it allows our African clients to be when they invest in more politically and economically stable markets in the UK and Europe,” says Radford.

Tax considerations

Because there are tax considerations to investing in overseas property, it is a good idea to do your research and to seek professional advice, so these laws do not act against you, adds Radford. In South Africa, for example, R11 million per person can be invested offshore - a R1 million discretionary and a R10 million non-discretionary allowance.

When it comes to buying property abroad, South Africans should investigate whether a double taxation treaty applies. Other considerations include being aware of transfer or stamp duty percentages, Capital Gains Tax, income tax, as well as inheritance tax.

Finally

Once the purchase has been made, buyers stand to benefit from an investment that is essentially paid off, in terms of monthly bond and levy costs by the tenant, whilst benefitting from a rental income.

“Of course, the sooner a buyer starts growing their offshore property portfolio, the greater the long-term rewards - especially if financial stability in retirement and leaving a legacy for loved ones is front of mind,” says Radford.

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