Time for plan B
Residency-by-investment schemes gain popularity as SA investors realign their global wealth portfolios
ý Covid-19 may well have rendered international travel freedom temporarily meaningless, even for the strongest passports in the world. But the global pandemic hasn’t put an end to cross-border investment flows.
As the world begins to deal with the pandemic’s economic fallout, high net worth individuals are expected to increasingly reassess their investment portfolios and their international mobility options.
Parag Khanna, the founder of international scenario planners Futuremap, says: “The impact of the pandemic on public health, the global economy and social behaviour will prompt many to reconsider their global mobility options. As the curtain lifts, people will seek to move from poorly governed and ill-prepared countries to more proactive ones with greater resilience and better medical care.”
Chris Immelman, Pam Golding International MD, believes that residency-by-investment (RBI) schemes will be a big beneficiary of this trend, particularly among South Africans looking for ways to protect their wealth against an ailing rand and what is likely to be a deep economic recession after the lockdown.
Immelman says the group has already had an uptick in interest in residency schemes in recent weeks as SA investors start to reconsider their rand hedge
Kimpton Kawana Bay resort in the Caribbean island of Grenada
options. Pam Golding International offers access to real estate-linked residency investment opportunities in Portugal, Mauritius, Grenada and the US, among others.
The minimum real estate investment required to qualify for residency, a second passport or a green card (in the case of the US) varies between $250,000 and $1m. Immelman says that over the past five years or so Pam Golding has helped about 1,200 SA families acquire property via RBI schemes in various countries.
He says there’s been particularly strong interest in the Immigrant Investor EB-5 programme in the US lately, which gives South Africans the opportunity to acquire a green card (and eventually US citizenship) with a minimum investment of $900,000 in dedicated property ventures.
Immelman believes the relative strength of the US economy and its safe haven currency are major draw cards. “For any South African seeking a rand hedge, it makes perfect sense to invest in what is still the world’s biggest economy.
Chris Immelman: RBIS are gaining popularity
And the EB-5 programme remains the best route for South Africans and their families to gain legitimate access to work, live, play and study in the US.”
Other industry players are reporting a similar increase in demand for residency schemes. Amanda Smit, head of international citizenship at RBI advisory firm Henley & Partners in south, east and central Africa, says Covid-19 has prompted more South Africans to diversify their investment portfolios via real estate-linked migration programmes.
She says the latter are likely to become a preferred route for many searching for a post-pandemic hedge to safeguard their families and wealth against future shocks.
RBI schemes in European countries such as Portugal, Cyprus, Malta, Greece and Spain are particularly popular among SA investors, given that the region is a safe bet in terms of currency and asset class diversification. Smit says Europe is also geographically close to SA, which makes it easy for those looking to relocate to use it as a base for children to study abroad, or to eventually retire.
She says Henley & Partners recorded a rise of nearly 50% in applications for Portugal’s Golden Visa programme in the first quarter (year-on-year) while applications for Cyprus’s real estate-linked investment migration programme showed an even sharper increase of 250% in the first quarter.
Nadia Read Thaele, MD of residency and investment planning firm LIO Global, says despite these residency programmes becoming more expensive on the back of the rand’s devaluation, they haven’t lost any of their allure. Most SA investors are simply using funds they already have offshore.
Besides, Read Thaele believes the weaker rand is negated by the capital growth of real estate investments in hard currencies over time. Also, most properties available to purchase in residency schemes can be leveraged to earn a short- or long-term rental income in dollars or euros.
What it means: As Covid-19 knocks the economy, wealthy South Africans are moving money into RBI schemes