In the past most property companies (investment or otherwise) have seen fit to promote property in countries hosting the World Cup billing it as the “next big thing”, an ideal way forward for strong rental returns and generally implying that it will continue long after the final goal and the beer cans have been swept away.
The reality of this does have to be questioned a little though, try as I might, finding any reports or case studies of people still making healthy returns after a World Cup investment seem to be somewhat thin on the ground to say the least. There are plenty of sites and articles screaming from the roof tops about how to go about it and “do it now”, but not one relating to how successful anyone has actually been at it.
Whilst the World Cup itself as a sporting event is one of the largest in the world along side the Olympics, attracting millions of visitors to a region, and billions of tv spectators. There is no question that the marketing angle of such investments are a great idea conceptually, but if it’s all that great, why does no-one shout about the successes of it all?
One possible reason is lack of forethought, from a number of angles. Primarily location to start with. Most World Cups require vast investment from the government and/or sporting bodies and companies in the form of stadiums, be they building new ones or refurbishing old ones. In many cases, new stadiums are built simply because the older ones just don’t have the space due to them being surrounded by nearby expanding cities. New stadiums add the huge additional cost of infrastructure to the government bill too, another cost that has to re-gained somewhere.
The problem generally arises when the whole thing is over though. Once you have been to see your plush new investment property after having ridden on a shiny new train from the sparkly new airport, and subsequently watched your team win/do ok/fail miserably (choose applicable) who is still there to use your property, or indeed sell it to? Of course, if the World Cup were to be held again in the same place, that would be fantastic! Ask yourself the question though, wherever you might be, “How many World Cup competitions has your country seen?”
Aside from all of this though which relates to any area with “gifted” tourism in the form of a major event, South Africa has, in its own right, a couple of things to be aware of prior to making any investment at all. The currency in South Africa is the Rand and subject to extreme volatility. Most South Africans with any substantial wealth or assets usually have offshore accounts, many using the offshore status to own property and businesses in their own country, as well as abroad. Whilst some aspects of this are frowned upon by local law makers, it tends to be a fact of life for one primary reason.
For years there have been restrictions on sending funds out of South Africa, mainly in government bid to keep the currency stable. This means as a foreigner investing there, there are a few hoops one has to jump through to make sure any investment you do make, you can actually get the profit back out of the country. (Or indeed the initial investment) The restrictions have always allowed a nominal amount of cash to be sent out of the country usually though only a few thousand US Dollars. Not a lot of use if you have just sold an apartment for 100k!
There is no question that South Africa is a beautiful country, and if you intend to retire there or live in the country permanently, then fair enough. As an investment because the World Cup is in town? Long or short term it would be a very speculative play indeed given the overwhelming number of variables and frequent changes to the laws.
Successful investments are about exactly that. Success. Hidden investment opportunities are usually that way for a reason. The common reason being is that the only person making money is the promoter. In times like these, a little forethought into the much larger picture will pay off.
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- Wednesday 24 February 2010