Buying a property for investment in Cape Verde
Why invest in Cape Verde?
The Cape Verde islands can boast similar features to all that it is reported to be - the open white beaches of Barbados, the vibrant tropical atmosphere of Jamaica and the topographical variety of the Canary Islands, however, considering that the UK market has only just begun to buy property there, much mystery still prevails. Here we address some of the most common questions put to us.
Should I invest now?
The answer is never an easy yes to this question but prices at the moment are still remarkably low - the cheapest being around -35,000 for a studio apartment to about -160,000 for a fully furnished high-end villa with guaranteed sea views. We are seeing a marked increase in interest since we started trading at the beginning of the year and serious investors hoping to buy cheap and sell dear are finally parting with some cash. It is still too early though to say what your gains are likely to be and over what time-scale.
Another factor to take into account is that of location, most developments currently are situated a mere stones throw (if you can chuck a pebble 200m) from the sea front. As development takes hold future property, particularly that on Sal will be built in the plots behind away making you a little less money when you decide to sell and more difficult to rent in the meantime. At present, developments are largely restricted to places with a stable or growing infrastructure and new beach-side locations will become worthy for development over time. (Read the section on foreign investment for more details on this topic)
When will I see a return on my investment?
We are already seeing a rise in the price of our developments over the last three months, the same apartment now worth between 3-7% more than originally pitched. This is sometimes due to the status of the building work i.e. whether it is in progress or not - people will be more likely to buy something that they can see. However, it is an increase none-the-less and set to rise further on completion.
This is still no indication that the price will continue to increase exponentially with time, what we are witnessing could be a symptom of the investment bubble where prices rise simply because people will buy hoping they'll rise. What you need to do is probably visit the islands for yourself to decide whether or not you think they will be the next holiday makers paradise. Based on this belief, some forecasters believe that investors in property now will see a return of between 70-80% over the next five years.
What is the weather like?
Ah, the British! Yes, it really can offer sun all year round. And ambient temperatures hover between 24-28°C with rain more likely between August and October. Some of the more exposed coastal areas can get quite windy but most visitors welcome the cooling breeze. Such conditions are vital for the water sports industry however and Cape Verde is hailed as one of the best locations for wind and kite surfing in the world.
How does the Cape Verdian government view foreign investment?
Very positively, Cape Verde's doors are open to private foreign investment as a means to create a sustainable growing economy through job creation and capital investment and thereafter the collection of tax revenues. Legislation to entice external private investment into Cape Verde was introduced in 1989. The 'Lei de Investimento Externo' (External Investment Law) introduced in 1993 broadened and enhanced the existing legislation to attract private foreign investment by non-Cape Verdean nationals and includes a 5-year initial tax holiday and a subsequent tax reduction by 50% on corporate tax (currently 30%) for the following 10 years. Meaning that if you were to purchase property now, sell it and buy another property within in Cape Verde in 5 years from purchase you would be exempt from paying any profit gains tax. This is a big incentive for foreign investors looking for the best return on their portfolio. Also good for the first-time buyer who is unable to find his dream home but is looking to invest while the market is still relatively cheap. Buying small now and moving your investment on is certainly one of the safer options available.
Can I get a mortgage over there?
Mortages are possible but only to assist the purchase of completed property. The maximum loan-to-value ratio is currently around 80% and a good grasp of Portuguese will normally be essential to arrange it.
Is there any resale property?
Hardly any. We do get offered some big resale properties that can be sold to people looking to set up a bed and breakfast or simply own a unique property in prime location. Generally the resale market is all tied up. Much of it is now being held by investors waiting for the boom in prices, the rest is simply not of a marketable standard.
What is the rental market like?
The market for rentals is still fairly young and, considering the difficulty in travelling to Cape Verde, this is unlikely to mature rapidly any time soon. The most popular rental location is currently on Sal and developers on other islands (particularly Santiago) will boast the benefits of rental once the tourist trail starts flying holiday makers in from around the globe. Currently, most international flights end up in Sal but Santiago is also now poised with Birmingham in the running to transport the UK market. Another aspect controlling significant rental opportunity in an area is the development of the local infrastructure. Again, Sal wins hands down. If you are buying to rent it is recommended that you visit the island beforehand to asses these and other criteria. Some off-plan projects are built in advance of available amenities reaching them and will be quite cut off at first. Currently, rental income tax in Cape Verde is 20%
In conclusion
The market is yet to produce wholly convincing statistics on the success or failure of your investment but there is plenty of opportunity to be taken while the market is still young and the general consensus seems to be that, in a world that is getting more and more saturated by tourism, and Bournemouth simply is no longer an inviting retirement destination, investment abroad is a fairly safe place to put your money. Whilst buying off-plan has its benefits it also has its downfalls. You may find that the information you are provided with is less than clear - another symptom of a youthful market - or that your glossy brochure doesn't seem to quite add up when you visit the place. Buying off-plan doesn't mean you have to expect to be left in the dark about anything. Make sure you obtain a clear picture of where your unit will be and what it will look like, particularly if you are not intending to visit. Ask lots of questions and get legal assistance if you think you need it. And then organise your payments and wait and see ..
