Can you get international residency by buying Offshore Property?
Scott Picken: CEO of International Property solutions (IPS).
It is a complete misnomer that investing in offshore property will bring investors citizenship or provide them with an international passport.
This is the word from Scott Picken, CEO of Offshore investment specialists, International Property solutions (IPS) , who says this is rarely the case as hidden factors result in 80% of offshore investors losing money. Picken adds that in his 15 years of experience with international property investing and advising over 2,000 clients to invest internationally – at a value of over R1.6 Billion - he has not seen one opportunity where individual investors get a passport that also makes sense as an investment.
“If you want to become a global citizen you have to invest in first world assets and a first world income to ensure that you can grow and maintain your wealth,” he says. “If you make the right investment decisions, then your global wealth will ensure that you have the luxury of living wherever you want with your family.”
For example, he says that in Mauritius you can obtain residency by investing $500 000 to buy a house through an IRS scheme. You lose that residency, however, if you decide to resell the property. This leads to the understanding that one can effectively “rent” your residency there. “The majority of property opportunities in Mauritius are based on tourist markets,” says Picken. “The fact is that the market in Mauritius is unsophisticated, with limited research to back up statistics. For example, the 2011 Housing Census showed an increase of a massive 16.1% in the hotel, tourist and guest house categories. However, this market is so unsophisticated, and the property investments in this area are majorty foreign, and investors are left having to hope that these tourism numbers stay on the increase to ensure the promised yeilds. A dubious investment, with limited fundamentals.
Another example Picken sites is investing in property in Cyprus. If you invest EUR 300 000 you can buy a house, get temporary residency and five years later apply for a passport. “While at face value this sounds great if you are thinking citizenship, investors must look at the fundamentals of the market they are investing in,” he advises. “Liquidity problems, record levels of unemployment and huge uncertainty in the market (Cyprus banks are tied to Greece) continue to send the Cyprus property market into a tail-spin. On top of this, sales have been down for 16 consecutive months, and were 11% down in 2009 when the market crashed. Overseas sales are down 36% (in some places as much as 90%) due to huge problems with legal titles and the deeds office in Cyprus (Cyprus Property News, Feb 2012). A serious stock overhang, weakening occupational and investment demand and the consquences of a worsening Greek banking situation do not bode well for the Cypriot real estate market. Prices in general have lost 30%. (Cyprus Property News, Dec 2011).”
Another area where investing for a passport does not make sense is in the United States. The USA’s Federal Scheme EB5 means that it is possible to obtain a greencard when you invest $500 000 or more in a property there. “This sounds like quite an attractive offer, until one takes into account the returns on that property- currently standing between three and four percent in, for example, a new Florida based development,” says Picken. Florida, according to extensive research, is the worst effected property market in the USA with massive oversupply problems and reposessessions, making the long term market questionable. “This is quite a contrast to our partner investors, who have successfully invested across 1100 properties, yeilding on average 21.1%, over the last six years. New investors must take into consideration the fact that the Federal EB5 greencard scheme only applies in areas where the government needs to revitalise developments and create jobs.” Although Picken advises that passports and visa’s should not be the driving factor in investing overseas, he reiterates that the benefits can yield great return on investment but needs solid and sound investment advice.
Picken will also be hosting a golf day at the Bryanston Country Club, Johannesburg, on the 30th of March, and will be doing a presentation on the 5 biggest threats affecting South Africans and and how they can have wealth preservation, a plan B and peace of mind for them and their families.
