Be wary of offshore property scams
● Increasing numbers of South Africans are falling prey to boiler-room tactics in their desperation to buy property offshore in the face of looming land expropriation without compensation, an economy in recession and growing fears about the country’s future social stability.
This is according to Ian Edwards, partner and Africa regional manager of Austen Morris Associates, a global wealth manager which operates in a number of countries, including SA.
“Increasingly we are seeing people who have been panicked into buying properties that are worthless or next to worthless from offshore and local salespeople with hazy credentials and fake promises,” he says.
Tim Mertens, chairman of Sovereign Trust, an international fiduciary and taxplanning business that specialises in offshore structuring for foreign assets, says there is no doubt that there are hard-sell salespeople trying to flog property and take advantage locals’ fears about SA’s political and economic uncertainty.
Although offshore property is an asset class some South Africans should consider, he agrees there has been an uptick in offshore operators attempting to entice South Africans into developments — and some of these operators are less than scrupulous.
Property scams
“We had a client who bought into a UK property and it was an absolute disaster. He did not get the property transferred into his name and lost money,” Mertens says.
Many investors invested in developments on the Costa del Sol, in Spain, that did not have property planning permission, he says. In some cases investors lost their whole investment. In another case, a South African bought land in Croatia that never belonged to the seller, he says.
Edwards says investors have a kneejerk response to worrying headlines about land expropriation, impending IMF bailouts, a falling rand and rising taxes.
“It’s that desperate feeling that if they don’t do something immediately, they will be much poorer in the future. It’s these kinds of fears that unscrupulous advisers prey on.”
Over the past few months, Edwards says, he has assisted people who have been suckered into buying property in what turned out to be swampland in Miami, land which does not have planning permission and on which nothing can be legally built in the UK, and council housing in the UK with tenants on welfare who refuse to pay rent.
Do your homework
Edwards says he’s a strong advocate of offshore property investment, but only after extensive analysis and due diligence.
“South Africans like property as an asset class and feel very comfortable investing in it overseas because it is a tangible asset, often less volatile than stocks, and can provide somewhere to live should they want to leave the country,” he says.
Pam Golding’s offshore property division says it is experiencing unprecedented demand from South Africans looking offshore.
Chris Immelman, MD of Pam Golding International, cautions that anybody considering purchasing property offshore must do their homework and ensure they work with businesses that have a good track record.
Get a second opinion
Ensure that you are dealing with reputable operators, warns Mertens.
He suggests you seek advice from an independent property adviser to assess opportunities even if the property operator you are dealing with is reputable.