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