Financial Mail - Investors Monthly - - Contents - Prop­erty In­vest­ment edited by Joan Muller

Wealthy South Africans look­ing to in­vest in res­i­den­tial prop­erty abroad with the added bonus of quali­fy­ing for res­i­dency in a Schen­gen state, are in­creas­ingly turn­ing to Por­tu­gal. The coun­try in­tro­duced its Golden Visa pro­gramme in Oc­to­ber 2012 to al­low in­ter­na­tional in­vestors to ob­tain res­i­dency by buy­ing fixed prop­erty for a min­i­mum €500 000 (R7,5m). Chris Im­mel­man, MD of Pam Gold­ing Prop­er­ties’ in­ter­na­tional and projects divi­sion, says lat­est fig­ures from the Por­tuguese author­i­ties show the coun­try has is­sued 2 289 Golden Visas over the past three years, which at­tracted €1,33bn in for­eign in­vest­ment through real es­tate pur­chases.

More­over, for­eign in­vestors rep­re­sented 25% of all prop­erty trans­ac­tions in Por­tu­gal in 2014. Though the Chi­nese ac­counted for the bulk of th­ese ac­qui­si­tions, Im­mel­man says a num­ber of buy­ers also come from Brazil, Rus­sia and SA.

He be­lieves for­eign in­vestors, es­pe­cially South Africans, are at­tracted to Por­tu­gal’s value propo­si­tion. It is still a lot more af­ford­able on a price per square me­tre ba­sis than other Euro­pean des­ti­na­tions. The av­er­age price for an up­mar­ket apart­ment in Lisbon’s city cen­tre is €3 000/m². That com­pares to €4 000-€12 000/m² in Barcelona, Madrid, Am­s­ter­dam, Rome, Paris and Lon­don.

Im­mel­man says Lisbon also of­fers at­trac­tive rental re­turns of around 5,25%, which is the sec­ond-high­est in Europe (only topped by Dublin, Ire­land). He says a num­ber of SA in­vestors in their 40s and 50s are buy­ing prop­erty in Por­tu­gal so that their chil­dren will be able to study and work in Europe at some fu­ture stage. Res­i­dency not only al­lows one to live and work in Por­tu­gal but also to travel freely with­out a visa to any Schen­gen state.

Im­mel­man says The Times re­cently ranked Lisbon as the best city in which to buy a sec­ond home in 2015. It was also voted 2015’s Best Travel Des­ti­na­tion by CNN Travel.

Bets on prop­erty stocks pay off

The South African listed prop­erty sec­tor may well be look­ing ex­pen­sive but share prices of many real es­tate coun­ters con­tinue to test new highs. In fact, the sec­tor has out­per­formed all other as­set classes by a sub­stan­tial mar­gin, both for the year to date as well as over 12 months.

Listed prop­erty de­liv­ered a to­tal re­turn (in­come and cap­i­tal growth) of 13,26% from Jan­uary to Septem­ber ver­sus the Alsi’s rather muted 3,39%, lat­est fig­ures from Cat­a­lyst Fund Man­agers show. Cash and bonds notched up 4,76% and 2,67% re­spec­tively.

The per­for­mance gap over the 12 months end­ing Septem­ber is even more pro­nounced, with the 38 prop­erty stocks tracked by Cat­a­lyst de­liv­er­ing an av­er­age 26% to­tal re­turn. The Alsi, cash and bonds man­aged only around 5%, 6% and 7% re­spec­tively.

How­ever, stock pick­ing has be­come the name of the game judg­ing by the grow­ing dis­par­ity among in­di­vid­ual prop­erty coun­ters. The dif­fer­ence be­tween the best (Fortress In­come Fund B at 86%) and worst (Free­dom Prop­erty Fund at -55%) real es­tate funds, year to date, is 141%. Other top rank­ing stocks are ho­tel fund Hos­pi­tal­ity B (70%), with a strong re­cov­ery, seem­ingly on the back of loom­ing cor­po­rate ac­tion; mall owner Re­silient Prop­erty In­come Fund (41%); Ger­man-based Sir­ius Real Es­tate (38%); and Lon­don-fo­cused Cap­i­tal & Coun­ties Prop­er­ties (38%).

The sec­tor was trad­ing at a his­toric div­i­dend yield of 6,4% at the end of Septem­ber. That ex­cludes non-in­come pay­ers Piv­otal and At­tacq and rand-hedge coun­ters with 100% off­shore earn­ings, in­clud­ing New Europe Prop­erty In­vest­ments (Nepi) and Re­de­fine In­ter­na­tional.

Lisbon’s his­toric city cen­tre

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