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PASSPORT OPTIONS, THE NEW LEGACY

Golden Visa Programme continues to attract South African property investors

Monday 4th of June 2018

Porto, Portugal old city skyline from across the Douro River.

It seems South Africans are right on trend when it comes to selecting an international investment destination for residential property. And while there is growing interest from affluent investors to externalise their wealth, foreign citizenship through residential investment programmes, like Portugal’s Golden Visa, are still the main goal.

The Know chatted to Chris Immelman, MD of Pam Golding International.

“As the globe becomes even more accessible through technology, more and more young South African professionals would like the option of applying for jobs in Europe, without the hindrance of South African passports to lock them out. One of the successful ways around this, is the purchase of overseas residential property with attached citizenship options,” says Immelman.

With Portugal being hailed as the ‘California of Europe’ and attracting a host of global buyers since the effects of important property and tax legislation changes over the past four years opened the way for Lisbon’s economic renaissance, South African purchasers were quick to respond to the long-term capital appreciation and short-term term dual citizenship prospects.

“There is no doubt that purchasing property in Portugal is an excellent investment and rand hedge,   however with 99% of the investors showing no desire to leave South Africa, it shows that there is no better legacy to leave one’s children than passport options,” says Immelman.

Since 2016, 140 South African families have successfully entered the Golden Visa programme through Pam Golding International, whose significant due diligence is paying off with a zero percent dropout rate, 30% growth and not a single tenant vacancy for these early adopters. According to Immelman, apart from the extensive legal groundwork, the group have made a substantial investment into independent research of Portugal’s short and long term socio-economic position, which includes the property investment opportunity, through Savills international.

The Golden Visa scheme which began by offering Portuguese residency to families with dependents under 18, in return for a €500 000 real estate purchase with permanent residency achievable in year six and citizenship in year seven, has recently, in certain circumstances, lowered the threshold to entry to €350 000.

Since the recent repeal of rental controls that protected non-paying tenants, historical buildings in locations earmarked for urban regeneration have become available to developers, providing a segue to offer refurbished units for €350 000 to foreign investors.

Says Immelman: “Following the announcement of this new opportunity, we searched far and wide for a development project that stacks up against our stringent due diligence and developer requirements. One of these is the exceptional Sé Catedral Hotel in Porto, Portugal’s second biggest city, located on the northern coast. The exceptional Mercan Group development will transform an old apartment building into a stunning 68 room boutique hotel over five floors.

“With views over the Porto’s beautiful Se Cathedral and nearby iconic Dom Luis Bridge, a famous tourist attraction, the hotel suites will each be sold to individual buyers for €350 000. This is essentially a buy back scheme, where owners will enter into an agreement with the developers to ultimately sell the units back to the developers who will run it as a hotel. On payment of the sum of €350 000, and upon completion of the development, owners will receive a guaranteed return of 4% for a five year period, after which, the unit will be handed back to the developer and the owner receives their full purchase price back.”

Immelman says that although the owner does not benefit from any capital appreciation, their downside is fully underpinned.

“Essentially, you are able to acquire EU citizenship without it costing you anything, as the 4% rental guarantee will pay for all the government and professional fees while your initial investment of €350 000 is returned to you. Owners enjoy seven days’ free accommodation per year and can apply for citizenship after six years,” says Immelman.

With 220 days of sun each year, a flourishing tourism industry and a shortage of hotels, further boosting the demand for such accommodation, Portugal offers residents free quality health care and excellent education facilities. In fact, amongst the 300 or more higher educational institutions is the English language driven Nova University, recently voted as one of the Top 30 Business Schools in Europe in a Financial Times survey.

Besides the fact that English is Portugal’s second language, the cost of living is way below that of its immediate neighbours who are opting-in enthusiastically since the country’s introduction of non-habitual resident (NHR) tax regime.

“Five years ago, you would seldom find a Frenchman living or holidaying in Portugal, but 10 year tax exemptions on foreign pensions and investments have changed this significantly and it is certainly one of the pillars feeding the Lisbon revival” says Immelman.

Another factor fuelling economic resurgence is the abolishment of low cost carrier airport taxes in 2012, which had previously left Lisbon off the tourist map while holidaymakers made a bee-line to the Algarve. The change has resulted in a 15% year on year growth for the hotel-scarce Lisbon tourism industry resulting in an explosion for the Airbnb market, currently boasting 6-8% yields.

Most South Africans are buying new apartments that are attractive to tenants and that yield a desirable investment return. Not only do Pam Golding International introduce the prospective buyer to a number of properties that meet their specifications, but the team also ensure that they are referred to a careful selection of reputable local real estate partners, thus giving them access to the entire Portuguese market at no extra cost to them.

Once in possession of a title deed, the buyer is introduced to Edge International Attorneys who begin the residency process. New owners simply need to enjoy seven days holiday of Mediterranean sun for five years before they can apply for permanent residency. During that time, they’ll also have to check into Lisbon’s ‘home affairs’ to complete their biometrics and pass a basic language test. Applications for citizenship are opened up in year six.

For good reason, Portugal remains a highly sought-after rand and citizenship hedge, but now new kid on the block, Cyprus is also stirring up interest in the marketplace. To find out more about the extensive overseas residential investment opportunities available to South Africans, speak to Pam Golding International for expert advice along every step of the journey.

 

 

Posted by Niki Jackson