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Politics, it seems, these days mostly involves the art of creating turmoil and uncertainty, certainly in South Africa, although other examples around the world also abound. Here however, anxiety levels have recently been rising around the controversial debate on expropriation of land without compensation and how that might in future affect your property rights, or the value of your property. The short answer is, we don’t know yet.
From an investor’s perspective, property (especially “bricks and mortar”) has, and will most likely always remain a great investment option. But, for any property investor, such uncertainty is also no friend.
So what to do? The wise old dictum: diversify, diversify, diversify remains true and, for better protection, this should always include an offshore allocation of one’s portfolio. In this case investing in international property offers an ideal solution with many benefits.
No clear picture
Making much sense of the current land debate in South Africa or where it may be headed, is not easy. In brief, to better reflect the country’s demographic composition, orderly, legal and compensated redistribution of land still largely owned by whites has always been a part of the political agenda since the transition to democracy in 1994. But the process became bogged down in official red tape, inefficiency and accusations being bandied about.
When the radical but small Economic Freedom Fighters (EFF) party as a result started forcing the issue, the governing ANC agreed to set up a parliamentary committee to probe the possibility of amending the Constitution to allow for expropriation without compensation (EWC). Although factions in the ANC were divided on the issue, it’s believed the party also saw this emotional issue as a means to help reverse its electoral losses of 2016 in next year’s general election. But President Cyril Ramaphosa has always insisted that EWC would be only one of various land reform instruments available, and that it would only be utilised if it did not harm the economy, agricultural production and food security.
Nonetheless, since then the process has developed into a quagmire of controversies and uncertainty. Parliament’s public hearings have been highly emotional rather than substantive; traditional leaders warned of serious trouble if communal tribal land they control is touched; the EFF continues to instigate or lead illegal land invasions in urban areas; white farmers are trying to resist; and over 2-million people in urban informal settlements are waiting for land and houses as a result of poorly managed rapid urbanisation. To make matters worse, with elections looming next year, the issue has become a political football, further distorted for electioneering purposes.
This rather chaotic uncertainty has raised many uncomfortable questions for property owners and investors. Will all property rights – agricultural, commercial and residential – be affected, or only some? Will any constitutional amendment put property relations and rights in general at risk? Will the value of land and other properties be adversely affected? What future protection will property owners have?
No-one can answer these questions at present. Which brings us back to the importance of diversifying one’s investment portfolio with a substantial offshore component that includes property, especially amidst so much uncertainty.
Diversify offshore in property
At Carrick we believe the international property market offers many exciting, beneficial and secure investment opportunities to hedge against this uncertainty. It is an excellent asset class for those who like to invest in property that can add significant value to one’s investment strategy and portfolio, limit risk exposure, and earn excellent returns in a hard, international currency. Investment values and growth remain consistent and secure in select jurisdictions and proven markets, as these are historically much less affected by economic and political conditions.
When considering international property purely as an investment option and not for personal use, it can be utilised for generating income, tax planning, education funding and retirement planning. Viewed as a long-term investment, one will have to take into account factors such as capital appreciation, the property’s marketability, rental income, maintenances costs, management fees and combining quality builds with excellent local market potential. For rental purposes as an income generator, it is also important to carefully consider location – close to public transport, educational institutions, commercial centres and public amenities.
For these reasons, investors in international property should always seek the services of specialists in the field of international property management to assist with all the requirements of investing across jurisdictions and in different markets with which the investor is usually unfamiliar.
Carrick, has partnered with a global network that provides end-to-end international property investment services. These range from sourcing and identifying high-quality property opportunities, to obtaining all relevant information, doing initial analysis, securing international mortgages and financing, providing assistance with international currency transactions, and offering support with process requirements as well as rental management.
In addition, Carrick assists investors with ongoing wealth management requirements, providing tax planning, and setting up structures in which to hold the property.
If you are concerned about the current land expropriation debate in South Africa and the uncertainty around future property rights and values, and would like to learn more about diversifying and investing in international property, contact Carrick today at [email protected]. Our advisers will be more than happy to assist you with any questions you may have.
- Carrick Wealth is a registered South African financial services provider specialising in South African and international financial planning and integrated wealth management solutions. Carrick is also licensed in Zimbabwe, Botswana and Malawi, and holds three global licences in Mauritius. Carrick at all times maintains its independence with regard to product providers and asset managers, providing bespoke risk assessment, financial planning and other services to high net worth individuals (HNWI). Through our own qualified and experienced wealth specialists, as well as through partnerships with industry leaders in the fields of foreign exchange, tax, international property, offshore bank accounts, trusts, wills and estate planning, Carrick is able to provide the highest levels of service for your financial planning and investment requirements, both offshore and domestic. This communication is intended solely for information purposes for the use of designated recipients and is not an offer, recommendation or solicitation to transact. While it is based on information available to the public and from sources believed to be reliable, Carrick makes no representation that it is accurate or complete or that any returns indicated will be achieved.