In recent years, a number of offshore destinations have opened to South Africans looking to obtain a residency permit or second passport through a property purchase. These include Portugal, Malta, Greece, Grenada and Cyprus.
However, the Indian Ocean island of Mauritius remains one of the most attractive rand-hedge destinations for SA investors, judging by the latest figures from the Mauritius Board of Investment (BOI), the government agency that promotes foreign investment.
BOI hospitality and property investment executive Vipashna Betchoo says that in recent months there has been an influx of South Africans buying holiday and retirement homes on the island, no doubt prompted by renewed rand volatility and sociopolitical concerns.
Since the Mauritian government opened the island’s housing market to foreigners in 2005 some 1,700 residential properties across 60 developments have been sold to offshore buyers at an average US$875,000 (R13.6m). Some 40% of these sales have gone to SA buyers with the rest split between investors from France, the UK and elsewhere in Europe.
Betchoo says SA investors are increasingly drawn to the island’s highly favourable tax regime, a stable and growing economy, increased choice of quality international schools and tertiary institutions, the low crime rate and outdoor lifestyle as well as English being the official language (with French and Creole widely spoken).
Betchoo notes that Mauritius has achieved GDP growth of an average 3.2%-3.4%/year over the past five years and growth of 3.9% is forecast for 2016. The tax rate for residents is a flat 15% for both personal income and corporate tax, and there’s no capital gains tax or restriction on repatriation of funds.
The Mauritian government last year also refined the legislation around foreign property investment under its new property development scheme (PDS), which aligns the tax treatment of former foreign property investment programmes.
Under the PDS programme, non-Mauritian citizens are eligible for a residency permit when they buy a property for more than $500,000 (R7.8m).
Foreigners are only allowed to invest in dedicated, approved PDS developments. Once a foreign investor has obtained residency, they can apply for citizenship after two years.
One of the first developments to be realised under the new PDS programme is St Antoine Private Residence, a luxury resort on the northeast coastline with 100 self-catering apartments and penthouses.
The development will be officially launched next month at prices varying from $520,000 for a two-bedroom unit of 150m² to $800,000 for a four-bedroom penthouse of 240m² with a private pool.
That equates to roughly R50,000/m², which compares favourably with apartments of similar size and quality at Cape Town’s V&A Waterfront and Atlantic Seaboard, which would typically set buyers back R50,000/m²-R80,000/m².
The project is a joint venture between local developer Red4 and ENL Group, the second-largest listed company on the Stock Exchange of Mauritius. St Antoine is the ENL Group’s third residential development aimed at foreign investors, the other two being Villas Valriche and La Balise Marina.
Timo Geldenhuys, director of Sotheby’s International Realty in Mauritius, the company responsible for sales at St Antoine, Villas Valriche and La Balise, says St Antoine will appeal to buyers looking for a more affordable product than most of the existing developments aimed at foreigners. The latter are typically priced from $750,000 upwards.
Geldenhuys, a South African who has been living in Mauritius with his family since 2005, says for SA investors the big attraction of owning property on the island is that you are getting a dollar-based asset with good potential for capital growth over time.
“In addition, SA buyers view the residency permit as an insurance policy against sociopolitical and economic risk at home, should they wish to relocate or retire to the island at some stage.”
Geldenhuys notes that SA buyers who bought a property in Villas Valriche when the golf estate was launched in 2008 and the rand exchange rate was at about R6.50/$ have to date achieved returns of up to 130% in rand terms. At the time, prices of three-bedroom villas started around $650,000; they have since climbed to $800,000.
New World Wealth this month ranked Mauritius as the African country with the biggest increase in its number of US dollar millionaires, with growth of 160% in the eight years to the end of 2015.