For the past few years estate agents have been touting property investments in ever more far-flung places that seem to offer an investor less and less.
One-bedroom flat in Bucharest, surrounded by Soviet-era concrete buildings anyone? Worryingly, plenty of people pile in to this type of investment, assuming that although they might not want to live, or holiday there, other people might.
Perhaps now, as the global property market slows, some investors need to rethink how they select overseas investment property using the obvious filter: would they want to be there?
Few, for example, would refuse the chance to wake up to sunny mornings and beautiful views of wide-open grassy spaces. Fewer still the chance to also see some of the world’s rarest animals while enjoying a sunset drink on the porch, especially one served by a personal butler.
Unfortunately, all that could cost you £2.6m. Should you be lucky enough to have that kind of budget give African Homesteads a call (+27 11 809 4523). He is building 15 houses on the 50,000 acre Phinda reserve in KwaZulu-Natal in South Africa at “the totally luxury end of the market”, reports the Sunday Times. The homes measure 600 square metres and contain four bedroom suites, a gym and a pool. The resort is so high end that you can forget making money from renting out your new palace, because letting these homes as safari accommodation is not permitted – the resort is a “private retreat to share with family and friends”.
For those on a tighter budget, a safari lodge can be had for as little as £126,000, the starting price for five private eco-lodges that are about to be built in the Abo Shamani Wildlife Ranch, part of the Kariega game reserve on the Eastern Cape (Pam Golding Properties; +27 46 648 1203). Or you could just buy an undeveloped 4,000 square metre plot at Royal Jozini in Swaziland for £44,000.
But while, for many, a house in the middle of a game reserve sounds a great holiday home, is it also a good investment? The fact that your home is in the middle of a wildlife reserve throws up some interesting quirks. On the plus side, “the most fantastic thing about our house is that we are living in the territory of the animals. Seven lions slept on our patio last time we were there”, gushes Bill Blevins in The Sunday Times. However, that’s a bonus feature that may terrify as many potential buyers as it enthralls.
For the undeterred investor, a word of caution on prices: South African property enjoyed some hefty gains at the start of the decade but things have slowed in recent years. Absa house price data – South Africa’s equivalent of the Nationwide price index – shows that annual house price inflation is currently at 14%, “down from its highs of 25%-plus in the years just after the Millennium”, says Graham Norwood in The Observer. So the opportunity to make big capital gains is probably over. On top of this capital gains tax on second homes and investment properties is a hefty 25%.
Another issue is the exchange rate. The South African rand may currently be weak against the pound, making now a good time to buy African assets in sterling, but things may not stay that way. As the sterling/rand rate fluctuates so does the value of your home, meaning that “even if nothing else happens to affect South African property values, you could still see the value of anything you buy there now gently slide on the international market”, comments Karen Robinson in the Sunday Times.
To at least minimise the risk of a sudden price hike in sterling, should the rand appreciate between the point you agree to buy a property and the time, perhaps six months later, when you finally hand over your cash, consider selling sterling forward at a fixed rate against the rand via a foreign exchange broker.
So, what about rental yields? Renting safari homes can be tricky, because safari holidays are still dominated by organised tours that offer transport to their properties and experts to show you the big game. Before buying, then, check whether the resort will help you find tenants and what services are available.
Finally, ask about land claims from locals where game reserves are on converted farmland. This can cause resale problems, says Blevins in the Sunday Times who sold a property with a land claim on it, “the fact it had a land claim on it probably put off about 20% of potential purchasers who were not familiar with the risks”.
Overall then, owning a safari home, while a dream for many, is probably best left to the brave or the very, very wealthy.