Property specialist and founder of Hurst & Wills, Lisa Bathurst, explains what to look out for when considering buying citizenship property – the risks and the rewards.
Being one of the few independent International property specialists with offices in South Africa, Hurst & Wills has seen a 400% increase in enquiries about investment properties for citizenship this year. “Citizenship-by-investment is on the rise globally with more than $2.4 billion spent each year, mostly from China, the Middle East and Russia,” says Bathurst. “We’re seeing South Africans spending more and more on it each year.
“There are all sorts of reasons people are thinking of having an ‘out’, from security and better education to tax benefits and travel freedom. Simply to have a good investment that earns and grows in a strong currency is another good reason we hear often,” she says.
There are quite a few different programmes available, each with its own set of pros and cons that one must consider before buying,” says Bathurst. “We get questions every week about whether it’s better to buy property in Turkey or Greece, or get a passport by purchasing assets in Moldova? The answer depends on your wealth strategy and your citizenship ideals,” she says. “You need to be sure that you choose a good investment, in a country you’d be happy to live in.” This is often the biggest challenge…. most of our clients are not planning to physically relocate, at least not anytime soon. They are looking for a Plan B – Just in case. In these instances, clients often get emotional about finding their ‘perfect home’ in these countries when in fact, finding a good investment would be the smarter choice, given the chances of ever living there are often slim.
As property specialists, we believe that it’s important to recognise the difference between buying a property for citizenship and buying an asset, says Bathurst.
“In the Caribbean and South America, there are lots of programmes that offer access to the US. The brochures look amazing, images of white sandy beaches and cabanas can be very seductive. However, when you look closely, you’ll notice that some of them offer hurricane discounts – and that should be a warning of what you’re putting your money into,” she says.
In the US, the EB-5 has become very popular. It has been in the press regularly lately due to the impending rise of capital required to apply, going from $500,000 to $900,000 in November. “It is important to understand that with the EB-5 you don’t necessarily purchase a property in the traditional sense,” says Bathurst. “You qualify for a Green Card if you invest $500,000 or more into a regional centre real estate investment programme. What this means is that you don’t actually own a title deed. You are in a scheme, so you must be sure it’s a good one,” she says. “I often advise clients to invest in property where you have control. This is not the case here. If you are considering an EB-5 make sure you have a full understanding of what exactly you are investing in,” she says.
In Europe, you can buy a passport for €280,000 up to €2 million that takes anything from a matter of months to 10 years to be issued. There are hidden warnings to look out for in these programmes, like the length of stays required and the future robustness of the program, says Bathurst. “The EU is also looking negatively at the countries that are seemingly ‘selling’ passports without you having to actually naturalise,” she says.
“Portugal is our top destination for citizenship investment property because by spending only €350,000 you can get a good investment property and citizenship for your family with an easy seven day stay requirement per annum.
Cyprus’ programme is much talked about but very expense, at €2 million. “Although there are lots of great property options, this is a very expensive market and I don’t believe all the property being advertised will be able to sustain its pricing,” she says. However, the country has experience 8 years of falling house prices and the market is now gaining momentum with sales transactions and construction activity rising strongly. Another up-side is that you will get a passport quickly. However, from an investment point of view, having €2 million tied up in an uncertain market is a risk. I would advise caution and doing thorough research before buying,” she says.
“Mauritius, a luxury holiday destination for the world’s wealthy, also offers residency to foreign nationals who want to stay long term with an $500,000 investment in property on the island. Successful applicants who stay in the country for more than two years can also be granted citizenship,” she says.
Investors should also consider that some countries are offering citizenship by investment but only in certain property asset classes or zones or certain resorts. “Sometimes it’s a share scheme or collective investment,” says Bathurst. “Exiting these can be difficult, you won’t always be able to sell it easily when you want to as the next buyer could be a very specific type of investor.
“The bottom line is that the property investment must stack up. In an ideal world you want a combination of getting the residency you require, in the timeframe you require, though an investment that earns you decent returns and offers you a decent exit once you have your residency, if required,” she says.
“The benefit of owning investment property abroad is that it allows South Africans to benefit from global growth and build wealth in strong currency as a Rand hedge,” says Bathurst. “It also offers a safe and stable ‘plan b’ for investors and their dependents.
“While we don’t claim to be immigration experts, as one would not expect an immigration company to be property specialists, we do work closely with citizenship experts. We also personally visit our markets to ensure that we are sourcing only the best property for you,” says Bathurst. “This means that long after your passport arrives, your property is still working for you, in line with your wider wealth strategy and your family’s objectives.”
