Reasons to invest in offshore property

International real estate is a growing industry. In 2017, a record R21.6 trillion was invested in offshore real estate around the world. Locally, Cape Town is the most popular city for foreign investors, particularly along the Atlantic Seaboard.

Buying a property in another country is slightly more difficult for South Africans due to the exchange rate. Foreign property prices are more expensive when converting rands into another currency, however, it can be done.

Investing in property outside of the country where one resides can have multiple benefits, besides being a place to stay when visiting another country. Here are some smart reasons to invest in offshore property.

Diversifying of your portfolio

Property investors often talking about diversifying a portfolio. This essentially means that by buying different properties, you’re spreading the risks and bolstering the long-term returns on your properties.

Adding another country to your portfolio is a great way to diversify.  International property markets can offer consistent returns and safe growth strategies if the investor knows where to look.

Don’t only look at investing in housing either. A solid strategy for diversification includes purchasing warehouses, retail space, offices and storage facilities. Each of these types of properties come with different growth potential and returns on investment through rental.

Buying property overseas is also a great way to diversify your currency. You can sell your property, or rent it out, and receive a strong foreign currency in return. This will then be worth more back in South Africa thanks to the exchange rate.

Foreign countries are investor-friendly

Buying a property offshore can present a lot more opportunities for investors. Real estate investment trusts (REITs) in foreign countries offer flexible structures for international investors, which encourages buying.

Locally, there are about 25 listed REITs as the South African property sector is still relatively small compared to foreign nations. In the United States alone, there over 200 publicly-traded REITs. This makes foreign countries more friendly for international investors.

Investing in more stable regions also has the benefit of consistent credit ratings. This means less risk and a more predictable return on your investment. Developed regions with long trading records are also more advanced in terms of upholding an investor’s rights to property ownership.

Take advantage of economic growth

At the moment, South Africa is experiencing slow economic growth. This will change, but it may be in a few years time. This makes the growth of the local property market very slow too. Homeowners aren’t seeing huge inflation on their property values.

Investing offshore can improve your returns as foreign property markets can offer higher growth potential. A property can be sold for more than what it was purchased within a few years in certain foreign markets.

Standard & Poor recently released their Development Reit Index. It showed that over the past five years, from May 2018, the American property market delivered a return of 11.3% (when converted to rands). The local property market returns are just under 8% over the same five years.

If you’re able to afford property, looking overseas has some solid benefits for investors. Property prices may be slightly higher but the returns are generally better and purchasing in more stable economies presents safety.

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Allow us to provide you with our expert knowledge on the Tokai, Kirstenhof, Bergvliet, Meadowridge area, ensuring you have the most accurate information and support when buying or selling your property. Contact us on +27(0)21 794 5252. We are here to ensure that you prosper through property!

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