OFFSHORE BOLT HOLES

South Africans with at least R4m to spare are showing renewed interest in ‘residency and citizenship by investment’ programmes offered by countries like Portugal, Malta and Cyprus

Real estate agents and offshore investment advisers have noticed a spike in interest from wealthy South Africans looking to buy an offshore pied-àterre in a bid to obtain a second passport. Industry players say the government’s plans to amend the constitution to allow for land expropriation without compensation and the recent sharp drop in the value of the rand have undoubtedly prompted fresh interest in investment opportunities abroad. Many are considering “residency and citizenship by investment” programmes as a hedge against political and economic uncertainty in SA.

“We’ve seen a surge in interest among high net worth South Africans to externalise funds, particularly since April,” says James Bowling, CEO and founder of relocation and investment firm Monarch & Co. “Residency and citizenship by investment programmes allow for a plan B, not only for the primary applicant but often … for their kids and future generations.”

It used to be mostly older, established families and business people who pursued these options, but Bowling has noted rising interest among younger people.

He says investors have far more choice today than they did 10-12 years ago, when Mauritius was one of the only places that offered SA property buyers the bonus of permanent residency.

Since the global financial crisis, a number of other countries have introduced residency and citizenship programmes to boost foreign fixed investment. These include Malta, Portugal,

Spain, Greece, Cyprus, the UK, the US and the Caribbean islands of Grenada, St Kitts and

Nevis, the Commonwealth of Dominica, and Antigua and Barbuda. Thailand also recently introduced a residency programme for foreign real estate investors.

Bowling says the residency and citizenship programmes offered by EU member countries such as Malta, Portugal and Cyprus are particularly popular among South Africans.

Entry levels for these are about €220,000.

The Caribbean programmes are also attractive, as they offer full citizenship and second passports in two to six months. Potentially higher capital and income growth, plus more secure property rights on bricks and mortar investments offshore, are other key incentives. So too are the corporate and personal tax benefits offered by most residency and citizenship programmes.

Lisa Bathurst, CEO of offshore property investment firm Hurst & Wills, says a host of new schemes have come onto the market, as have additional categories for eligibility in some existing programmes.

But investors need to do their homework. There is, for instance, a big difference between residency and citizenship, says Bathurst. Residency in an EU country allows you to live and work in that country, and potentially travel through the 26 Schengen countries without need of a visa. Citizenship, on the other hand, usually offers more advantages than residency and therefore tends to be more expensive and more difficult to obtain.

Bathurst says citizenship can result in a second passport, which allows the holder and his or her family to live, work, study and travel freely in any EU country. “That is obviously much more valuable than the option to live in one fixed place. Citizenship can also be passed on to children, unlike residency.”

Pam Golding Properties International MD Chris Immelman believes Portugal’s residency scheme, known as the Golden Visa, is currently the most attractive programme available to South Africans. He estimates that at least 300 SA families have invested in the programme in the past four years.

The Portuguese government recently discounted the €500,000 Golden Visa property investment threshold to between €280,000 and €350,000, depending on certain criteria, such as where the properties are located and when they were built.

Despite the strong growth in property values — 30% in the past three years — Portugal still offers buyers more value for money than many other European cities, says Immelman.

The country’s proximity to major European cities is another drawcard.

“The Portuguese capital, Lisbon, and the city of Porto not only offer old-world charm but are also transforming themselves and attracting young talent from all over the world as modern development and upgrades take place,” he says.

The Golden Visa programme initially allows for temporary residency; permanent residency can be achieved in year six, and citizenship in the seventh year. Portugal has relatively low personal tax rates of about

20% and no wealth or inheritance tax. Overseas pensions are also tax-free — no doubt one of the reasons the country is regularly voted as one of the world’s best retirement destinations.

South Africans looking to buy property in Portugal through the Golden Visa programme tend to be between 50 and 55 years old, selfemployed or successful business people, and earning R3m-r4m a year.

“Most are buying for pure investment

If you invest €2m upfront [in Cyprus], you acquire your passport within six months, with the opportunity to disinvest in three years with a return of say €2.5m Chris Immelman