Boiler room tactics targeting South Africans desperate for offshore property
* South Africans panic buying property overseas from dodgy advisers
* But best affordable overseas property for SA investors identified
* South Africans can acquire self financing property offshore
Increasing numbers of South Africans are falling prey to hard sell, boiler room tactics such is their desperation to buy property offshore in the face of looming land expropriation without compensation (EWC), an economy in recession and growing fears about the country’s future social stability.
So said Ian Edwards, partner and Africa regional manager of Austen Morris Associates, a 25 year-old global, independent wealth manager with representation around the world including Europe, China, across Africa, South Africa and soon the US.
“Increasingly we are seeing people who have panicked into buying properties that are worthless or next to worthless from offshore and local salespeople with hazy credentials and fake promises.”
Edwards cites people’s knee jerk desire to have an investment offshore because they see worrying headlines about land expropriation, coming IMF bailouts, a falling rand and rising taxes. “Often it’s that desperate feeling that if they don’t do something immediately, they will be much poorer in the future. It’s these kind of fears that unscrupulous advisers prey on.”
Edwards added that in the past few months alone he has assisted people who have been suckered into buying property in what is nothing more than swampland in Miami, land without planning permission (nothing can be legally built) in the UK as well as council housing (social housing for those on welfare) with nightmare tenants refusing to pay rent, also in the UK.
Edwards added that he is a strong advocate of offshore property investment but only after extensive analysis and due diligence. “South Africans like propertyas an asset class and feel very comfortable investing in it overseas because it is a tangible asset, often less volatile than stocks and can provide somewhere to live should they want to leave the country.
“But apart from country worries, South African investors are looking to overseas property to get a better returns. According to the latest data from propertymarket intelligence company Lightstone Property, average house price growth in South Africa is not even keeping up with inflation.
Their figures show that to the year end September 2018, SA property rose just 3.8% overall. “But more worrying is month on month data to September this year, a more immediate indicator, shows that luxury property (over R1.5m) is now experiencing house price deflation (-0.3%), high value property (R700k – R1.5m) growth is just above zero while mid value (R250 – R700k) monthly growth is only 0.5%,” Edwards said.
”Many local investors think property overseas is not for them because studios in London and Paris cost R20m and they have to pay cash. But the truth is property purchases can be financed so each month the rental income covers the bond payment and related running costs. Investors are cash flow positive from day one.”
He added that in response to a growing demand from clients for overseas property investment, Austen Morris Associates has identified several cities with excellent investment potential with apartments in the €200 to €400k price bracket which can typically be bought using a 50% bond:
Manchester – urban land values are up 24% in the last year and house inflation is about 8% with rent forecast to rise by 22% by 2022.
Birmingham – named as top location for UK property investment 4th year in row by PWC. It has a booming population, massive infrastructure spend and a sound local economy.
Berlin – prices have grown at 6% on average since 2006. A fascinating and booming city.
Lisbon – A very attractive city with good climate for South Africans made extra appealing by residence programmes. Property prices supported by growing middle class.
Bangkok – Strong demand from local and foreign buyers. 16% house price increase in past 5 years and healthy rental yields.
Edwards added these cities are attractive examples of the wide range of investment, country, price and lifestyle options available to South Africans.