Carrick clients are showing a keen appetite for offshore property. If you’re in the market for a sound investment, there are very attractive new developments in London and Berlin that are now open to investors.
While the global economy has taken a knock, it’s not all doom and gloom and investing in offshore property is still a very sound strategy if you are looking to diversify your portfolio. “Despite global economic challenges and uncertainty, a surge of investment is expected in global property markets in 2021 due to pent up reserves carried over from 2020,” explains One Global Africa Managing Director, George Radford.
Carrick Property recently announced the formation of a partnership with One Global Property, giving its clients access to a large array of products with some of the biggest and best developers in the UK and Germany. One Global deals with household name developers such as Barratt London, Galliard Homes and the Berkeley Group, among others, and are focused on optimising return on investment.
Which jurisdiction should you invest in?
When deciding where to invest there are a number of elements to take into consideration, advises Radford:
- What are your reasons for investing? Is it an emotional purchase or are you focused on the returns?
- What is your investment budget? Radford warns investors not to stretch themselves and to allow for contingencies.
- What finance options are available to you?
- What are the costs associated with the investment? Be aware of hidden costs and ensure you have full transparency.
- What is the overall return on investment? Understand your personal circumstances and also the landscape of the market into which you’re investing.
- What are the tax considerations in that market?
- What are the risks of investing? There are markets risks and regulatory risks, which cannot necessarily be controlled, but with due diligence they can be pre-empted. Then there are counterparty risks. “These we can control and that’s why we work with developers who provide our clients with stability in terms of the product to ensure that counterparty risk is largely eliminated,” says Radford.
Although markets such as Mumbai, Seoul and Sydney are showing positive growth, Carrick Property focuses on the European market where there are fewer barriers to entry and high levels of protection. Germany and the UK are key focus areas, with London and Berlin having been highlighted as top European cities in terms of their overall investment and development prospects, according to the PWC Emerging Trends in Real Estate report.
There are a number of reasons One Global favours the UK and Germany, says Radford. “Most importantly, there is stability, being the biggest and second-biggest economies in Europe and the fourth and fifth biggest economies in the world. They both offer an established investment environment in terms of property, high levels of protection for clients and there is good availability of mortgage financing. In Germany, no capital gains tax is payable if you hold an investment for 10 years or more on the sale of that property within the country. For our African clients where currencies are extremely volatile, having a hard foreign currency income in terms of a GBP or a Euro asset is very compelling.”
Penrose Apartments: Harrow
Part of a £1.75 billion pound regeneration project in North West London, which includes the development of 5 000 residential units, Penrose is the final block of phase one and comprises 71 private apartments.
- 999 year leasehold: This means there are no onerous ground rent provisions.
- Prices start at around £328 000 for a double unit. “To put it into context, that’s what some people are paying now for a one-bed unit in central Manchester. So this represents excellent value in London itself,” says Radford.
- Expected rental yields of up to 5%.
- 60 to 65% mortgages available, from around 4%. “That can be fixed or variable interest only, or principal and repayment mortgages, depending on what the client’s looking for,” adds Radford.
- 10% deposit on exchange with the balance payable on completion. “In the UK, you’ve got an HBC warranty on your 10% deposit so you are protected, which is really important,” says Radford.
- Minimum equity requirement: £125 000.
- The overall return on equity is around 85% over a 10–year hold based on 65% mortgage.
- Completion date: July/August 2022.
Keep in mind the window of opportunity before the Stamp Duty changes come into effect on 11th March. (Last year, the government temporarily increased the stamp duty threshold – the tax paid by people buying properties – to £500 000 for property sales in England and Northern Ireland.) Once the Stamp Duty holiday ends, a stamp duty surplus charge will apply. “On an investment like this, for example, that would be in the region of £8 000 – £10 000,” explains Radford.
Am Winterfeldt: Schöneberg, Berlin
Germany’s capital is high on the list of areas in which to invest. With the recent opening of the international Brandenburg Airport in Schönefeld, there is easy access to international business hubs around the world. It offers the added attraction of being the start-up capital too, with over 70% of start-ups in Germany taking place in Berlin. It also has a rental-attractive student population of 185 000.
Located south-west of Berlin in Schöneberg, Am Winterfeldt is a mixed–use development, including 225 private apartments.
- The ability to leverage property at very low financing costs is a big driver for African investors, says Radford: 70% mortgages are available from 3% fixed rate for 10 years. (Note that mortgage rates are due to go up slightly at the end of March to around 3.25% – 3.5%.)
- Expected rental yields of up to 4%.
- 15% deposit plus costs payable on exchange and the balance over the construction period.
- Minimum equity requirement: €100 000.
- A 10–year return on equity, in excess of a 100% (based on 70% mortgage). “It’s higher than London, for two reasons,” explains Radford: “Firstly, the growth forecast is slightly higher in Berlin than London. And secondly, because the costs of financing are significantly cheaper in Berlin, the investors erode more debt over the 10–year hold period, therefore increasing the level of profit they take away from the investment.”
- It is freehold title, which is standard in Germany. (This means you own the property outright, but be aware that you’re responsible for maintaining your property and land and will need to budget for these costs.)
- The units start at around €225 000.
- Estimated completion is the last quarter of 2023.
“We look forward to bringing these exciting developments to our clients across Africa,” says Bradd Bendall, Carrick Group Sales Director, who encourages those interested in these opportunities to contact Carrick Property on [email protected]