Some of the most expensive properties in South Africa have been bought by foreigners, it’s true. It is also true that the Western Cape especially is home to small colonies of Germans, French and British expats. You can even buy proper Austrian meatloaf and German magazines in Constantia.
Currently there is a small, but notable, trend establishing itself at present: British retirees are increasingly looking to South Africa in their golden years. It turns out that it’s not just due to the fantastic climate or amazing scenery – it’s about saving their pensions.
Due to the worldwide economic crisis there have recently been a number of proposals – dubbed the "Solvency-II for pensions" - made by the EU that directly affect pensioner’s pockets. The Telegraph reports that the country’s biggest companies (6850 companies with final salary pension schemes) could see their liabilities skyrocketing to more than double what they are now and analysts warn that this could force them to close.
The bad news continues; according to the Alexander Forbs National Pension Index retirement incomes in the UK have fallen by £13 000 since 2000. Richard Evans illustrates the real term implications of this in The Telegraph with the analogy that a 30-year-old could expect two thirds of his or her final salary in 2000. That number has gone down to 39 percent.
What does any of this have to do with the South African property market?
Quite a bit in fact; due to the weak local currency a British retiree can live well in South Africa – even on a diminished pension. Shelter Offshore, an international expatriate advisory website, indicates that South Africa is currently rated amongst the seven places to retire for an affordable lifestyle along with Argentina, Northern Cyprus and Slovenia.
Importantly, foreign pensions are not taxed here whereas a tax-free income limit of £9205 only will apply as of 2013, after which a tax of 20 percent to 45 percent will take effect in the UK.
Craig Featherby, Cape Town- based regional manager of deVere Group, a UK financial advisory firm, recently revealed that "…over-55s have lost faith in the UK’s economy, tax and pension system; last year 252 000 people left the UK and 24 000 of them came to SA.
"Certain fears may remain as far as currency fluctuations are concerned but retiring here must be an attractive option, I think interest might well increase," believes Jan le Roux, CEO of Leapfrog Property Group.
It is safe to assume that many of these retirees will invest in the local property market in their favoured areas: Cape Town, the Kwa-Zulu Natal coast and, occasionally, in Sandton, Johannesburg.
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