Now is the time to seek greener shores for your commercial property interests. Experts say investing overseas has never been more profitable.
If the economy is making it difficult for you to retain tenants and forcing you to sell off your local properties at a discounted price in order to stay afloat, you may want to set your sights beyond SA’s borders to grow your wealth this year.
International markets not only offer strong economies, high demand for commercial properties and sturdier currencies, but you can use your international property to borrow against for other investments, its costs can be tax deductible, and your profits would be sheltered and indexed against monetary inflation. This will not only help to support any remaining South African property interests might have, but enable you to further expand in more lucrative (global) markets.
Related: 3 Key reasons why you’ll find it trickier to attract property investors in 2017
The economic slowdown in SA might be influencing the number of tenants you have, how long they occupy your premises and the profitability of your buildings. If you want to earn from a more rewarding and stable environment, according to property sector experts, now is the time to invest in offshore markets.
“Our report suggests, long-term secure investment in core markets will be the norm,” says John Friedrichsen, CFO of Colliers International. “Large volumes of capital already raised will increasingly seek out opportunities in tier-two cities and in recovering markets.”
Here are examples of the core markets as well as the tier-two cities that you should consider investing in:
American property investment opportunities
The top three cities that will experience investment this year in the USA are San Francisco, New York and Los Angeles. San Francisco is a top choice for commercial real estate investors because of its aesthetic appeal and proximity to Silicon Valley.
Seth Kaplowitz, an attorney with Blumberg Law Group and lecturer at San Diego State University says: “Los Angeles and San Francisco are red hot. In Los Angeles alone the Chinese have invested close to USD5.9 billion.”
According to the Colliers surveyConfident Capital Moves up the Risk Curve,logistic properties such as warehousing, office space and shopping malls are the most in demand investments. Office and retail space had the largest year-on-year growth in investment transactions.
It’s important, however, to note that while warehousing and logistics space boast high demand, investment in this sector is tough because inventory is becoming harder to find. Ideally, you should look to partner with a property professional in your country of interest to ensure you have a real-word view of worthwhile investment opportunities.
European property investment opportunities
The U.K is still one of the hottest areas when it comes to investment, with London being the most desirable destination. Chris Immelman MD of Pam Golding Properties’ International Projects Division explains that London is the top property investment destination for South Africans. “Property in London offers excellent investment value property for those looking at pure investment with yields of between 4 and 5%.”
Related: Why you shouldn’t rely on currency value as a purchase indicator
Frankfurt is also a top investment destination because Germany’s property market offers stability. It managed to avoid a pricing slump even through the global financial crisis of 2008/2009. Paris too offers low interest rates, which is spurring buyer confidence despite recent acts of terror. Foreign investors use these markets as entry points to Europe.
Offices, shopping centres and luxury retail are the highly desirable opportunities in this region, partly because of lot sizes that enable larger international transactions, with minimum spend requirements. On the other hand, luxury retail slipped in popularity compared to recent years, most likely due to the growth of online retailing, but good properties will remain in demand for years to come according to real estate experts.
Take a dextrous approach
In many of the core markets mentioned above, it is becoming challenging for investors to meet return expectations, specifically because of overcrowding. Destinations such as New York and London and Paris are, arguably, becoming too niche and the market is becoming tired, some experts say. However, it’s not impossible to make money in these destinations – it just means conducting more intricate due diligence when looking for property abroad.
- According to Colliers, investing in San Francisco, New York and Los Angeles can offer sound returns.
- London, Paris and Frankfurt are European options for investment, but still require you to conduct adequate research into the properties you’re looking at.
- A few core destinations such as London and New York can still offer opportunities, but are becoming tired and too niche according to experts. It means knowing exactly what you want and how to make money from properties that matters most in these markets.