In an unprecedented low-interest-rate environment, international residential property has become an increasingly attractive investment prospect. This is even more true for African investors who seek consistent and predictable global income streams in the face of volatile home currencies.
You may be considered wealthy in your own country, but unless you have a hard currency income stream, your money is not secure. Yet if you’re sitting in Johannesburg, Gaborone or Bulawayo, how can you ensure that you’re consistently earning in one of the world’s strongest currencies? The answer? Invest in international property, say the experts.
What is wealth?
Wealth means different things to different people. Ultimately it’s defined by how much money you need to fund the lifestyle you seek. Yet, soft currency income (earned in a currency which is considered unstable and which fluctuates in value) is not a sustainable means of building wealth – the risks of putting all your eggs in this basket are simply too high. Therefore, true wealth can only be measured in stable and reliable forms of hard currency.
Simply put, a hard currency is solid and dependable. It’s not subject to dramatically shifting exchange rates, it’s accepted and sought after around the world and its value doesn’t depreciate. That’s because it exists in a politically and economically stable environment. Examples include the US dollar, the Japanese yen, the British pound or the Euro. Conversely, soft currencies – like those we earn in Africa - fluctuate continuously. They’re often too changeable to be accepted in international business transactions and are vulnerable to political and economic upheaval.
Why invest in offshore property?
A proven passive income stream strategy, purchasing and renting out residential property is one of the biggest global wealth generators. Investing in property in a country that operates in a hard currency is the perfect way to ensure a consistent and stable income. It’s for this reason that popular property investment markets around the world include the likes of the UK, Germany, Portugal and, increasingly, Mauritius.
Bradd Bendall, Group Sales Director, notes that earning a hard currency income is just one of the key drivers of international property investment for African investors. “Hard currency rental income is obviously a very attractive proposition for our clients in South Africa and across the Africa region where currencies are extremely volatile,” he explains. “Having a hard currency in British pounds or euros is very compelling.”
Other benefits Bendall highlights include:
- Long-term wealth generation: In a good property investment, over a 10- to 20-year period returns typically can outperform many other investments.
- Accessible financing: Being able to leverage the property at very low-financing costs in terms of small, fixed-rate mortgages.
- Rock solid: Property is a tangible, stable asset class which you can touch.
- Diversification: International property forms an essential part of a good and balanced investment portfolio.
- Economic and political stability: Investing in leading global economies offers greater levels of protection.
- Offshore wealth accumulation: Funds can be used for your children’s education or as part of your own retirement planning.
While there are significant advantages attached to offshore residential property investment, it is also important to bear potential risks in mind. As a landlord in any country, one does have to factor in expenses, both anticipated and unforeseen. These include property maintenance, downtime between tenants, property damage caused by tenants, the costs of investing in the right location and unforeseen market forces that may impact the value of your investment.
While COVID-19 has had a negative global impact on the retail and commercial property sectors, the demand for residential property has not waned, which adds to its investment appeal and capital growth, alongside consistent income, is now more appealing than ever.