Investment Property in Cape Verde
One of the Most Exciting New Property Investment Locations of Recent Times
The Cape Verde Islands are located on the west coast of Africa. Investment property in Cape Verde was featured on the UK Channel 4 TV programme, "A Place In The Sun", as the top property investment location of 2005/2006. Compared to many European destinations, property prices remain highly competitive in Cape Verde and this location is growing increasingly popular with international property buyers as a wealth of investment potential here becomes more evident.
Why Invest in Cape Verde?
Cape Verde is a top investment hotspot of the world while it currently undergoes huge development in tourist infrastructures. Property prices are at an all-time low and are sure to appreciate as Cape Verde begins to establish itself as a top international holiday destination. Direct flights from the UK commencing November 2006. Tax holiday incentives to foreign property purchasers. Exemptions of duties on imported materials for use in construction and installation projects connected with tourism investments. Strong economic position, encouraging high returns on investment. Stunning beaches, exotic Tropical plantations and breathtaking mountains to entice tourists. Very low cost of living, offering affordable holidays. Strong possibility of eventual inclusion in the European Union. Exchange rate value of local currency is fixed to the Euro. Multi-party very stable democracy, supportive of foreign direct investment. Over 70% increase in some property values over 2 years expected.
Cape Verde - Foreign Investment Policy
Cape Verde welcomes private foreign investment as a way to create a sustainable growing economy through job creation and capital investment and thereafter the collection of tax revenues. Legislation to entice external private purchasing of investment property in Cape Verde was introduced in 1989 and continues to attract investors to this day:
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 Verde nationals.
This law includes a 5-year initial tax holiday and a subsequent tax reduction by 50% on corporate tax (currently 30%) for the following 10 years.
These incentives can be extended indefinitely, as long as adequate re-investment is made.
Regarding tourism investment, an exemption is granted on import duties for materials necessary for construction and installation of projects. All net revenues are guaranteed transference out of Cape Verde in full and foreign currency bank accounts are available.
Private foreign investors are entitled to residency in Cape Verde if they employ more than 13 nationals or invest more than approximately 35,000 Euros. Caboverde Investimentos (which recently replaced Promex - the 'Center for the Promotion of Tourism, Investment and Exports') is a government agency that is officially the front desk for potential investors; the agency also approves projects and arranges further approval needed from the Government.
Cape Verde - National Development Plan
A healthy tourism industry is seen as the main area for development, targeted by the government in its strategy for sustainable economic development.
Supported by Cape Verde's international donors, the government is implementing a series of programmes through its National Development Plan (NDP - 2001-2005) to improve the infrastructures necessary for the development of the archipelago into a quality tourism destination.
Programmes included under the NDP cover areas such as transportation (air, maritime, inter-island and road transportation), communications, banking, health provision, electricity, water and sanitation provision and professional training.
Cape Verde - Tourism and Air Infrastructure
The new airport in Praia on Santiago Island opens a vital second international gateway to the Cape Verde islands from Europe and allows common aircraft such as the Airbus A310, A320, A319 and Boeing 767, 737 and 757. Its the opening of this airport that is seen as the dawn of the bright future in tourism for the Cape Verde Islands and in turn boost return on investment (ROI) prospects for early property investors on the islands.
The Cape Verde national Airline TACV will operate routes from the UK (November 2006) and from Lisbon and Paris as soon as the airport is open. A further boost to investors is that there is an "Open Skies" policy allowing other airlines to fly to Cape Verde and forcing lower airfares through competition.
It is essential that demand for the Cape Verde islands is created through high class accommodation being available and there are plans for a 150 room 5-star hotel in the center of Praia as well as a 135 room commercial hotel. Existing hotels are upgrading and expanding to meet the demand which the availability of air travel will bring to the Islands.
Natural and Cultural Factors
The Cape Verde Islands are located off the coast of Africa. They enjoy great all year round weather with an average temperature of between 22°C and 26°C. The climate of Cape Verde is typically classified as "dry tropical" with low humidity.
There are only two seasons in Cape Verde; the dry season between November and July and the humid season between August and October. During the wet season there are rain showers (about ten inches of rain per year) and about seven hours of sunshine per day and in the dry season this extends to roughly twelve hours per day. The islands have an average wind speed of approximately eleven knots, which means there is often a pleasant cooling breeze.
Water temperatures in Cape Verde range from 22°C to 27°C so swimming is enjoyable throughout the year. Owing to certain natural factors the Cape Verde islands are unlikely to be exposed to hurricanes like some of the Caribbean islands.
In general the climate enjoyed on the Cape Verde islands is in every way superior to that of the Canary Islands, which have enjoyed a huge amount of success with tourism, the major part of which can be attributed to climate.
Beautiful Tropical Beaches and Scenery
Cape Verde islands are the closest tropical islands to Europe and offer crystal clear waters and white sandy beaches. These factors are important in helping to establish Cape Verde as a huge tourist resort over the next few years.
The islands also have stunning mountain views and owing to the rainfall and climate, some breathtaking tropical plantations. These too will provide European travelers with an authentic feel of tropical adventure and offer an exciting alternative to other close destinations.
Economic Factors
The government of Cape Verde is investing heavily in developing tourism throughout the country. The greatest return on investment (ROI) will be achieved through the huge expected tourist interest in the Islands once the planned infrastructure is in place and property prices are set to rise accordingly.
Growth Potential in Tourism
The growth potential for tourism on Cape Verde is immense. All indications show that over time these islands will become as popular, if not more popular, than the Canary Islands. There are a number of natural factors in Cape Verde that help tourism on Cape Verde in addition to the economic factors listed here.
Travelling to Cape Verde is set to become easier with direct flights timed to coincide with the completion of major parts of its tourist infrastructure such as hotels and holiday villages.
With its unique blend of European and African culture, luxury accommodation, short travel times from Europe, beautiful beaches and mountain scenery and other economic features, Cape Verde will be hugely popular. This will add considerable value to property on the Islands. Remember however, the earliest investors will be those who gain the largest return on investment.
Strong Public and Private Investment – Reclassification of Economic Status
A compelling indicator of the expected market growth in Cape Verde is the huge amount of public and private investment the islands are enjoying. This has resulted in the islands being re-classified from a "low-income" to a "middle-income" country, which illustrates that investment into the islands is already creating change. Tourism generated revenues will increase these figures.
The Cape Verde government is actively encouraging investment and development by offering a 5-year initial tax holiday and a subsequent tax reduction of 50% on corporate tax (currently 30%) for the following 10 years to non-resident investors.
Other incentives include an exemption on import duties for building materials. Private investors who invest more than €35,000 or employ in excess of 13 nationals are entitled to residency.
These factors demonstrate the determination of the government to establish a stable tourism based economy and highlight the progress that has already been made to date.
A Multi-Party Stable Democracy, Supportive of Foreign Direct Investment
Cape Verde is a socially and politically stable country with all political parties (whether in Government or in Opposition) supporting macroeconomic and reform policies recommended by the IMF and the World Bank.
Policies are followed to take control of public spending, reduce domestic debt, privatise state companies and improve social services. All political parties are determined to attract foreign private investment, particularly into the development of the tourism sector.
According to the United Nations Development Programme, in 2003 and 2004, Cape Verde was a middle-income country, with the fourth highest Human Development Index (which takes into account various factors, such as GDP, life expectancy, adult literacy, education etc) of all African nations behind only the Seychelles, Mauritius and Tunisia.
The geographical isolation of the Islands means that conflicts in the West African region have negligible impact. Violent crime is not common. The justice system and local institutions are relatively strong by the standards of most African countries and corruption, whilst not unknown, is not a preoccupying concern."
Property Investment Strategies for Cape Verde
The "Pure Investment" Market in Cape Verde
Cape Verde offers a unique opportunity to property investors allowing them the opportunity to buy property at very low prices in a very new emerging market. By reading our investment research in Cape Verde section you can get a feel for the potential of the Cape Verde property market. The government in Cape Verde is actively encouraging international investment in addition to its natural features to develop the area into a Worldwide holiday resort. This is destined to happen in the very near future with the most obvious signpost to this being the completion in 2005 of the new International airport and the announcement of direct UK flights to the area set to begin in 2006.
For the "Pure" property investor there is the possibility to purchase property and land very early on the islands at very competitive prices. As the development on the islands progresses, tourism increases and awareness improves the price of property is anticipated to grow steeply. It is without doubt the very early investors who invest in property at the first stages of development on these islands that will surely make the largest profit gains.
The islands are often compared to Tenerife and the Canary islands. Imagine purchasing prime beachfront land or property on the Canary islands many years ago prior to it becoming the popular destination it is today and imagine how the value of that land or property would have appreciated as the demand in the area drastically increased. This is the situation available today for investors in Cape Verde.
Cape Verde offers a great opportunity for "pure" investors to secure property and land now and sell in the short term to secondary buyers but there are also some excellent opportunities in outlined in our buy to let investment Cape Verde section.
The "Buy to Let" Market in Cape Verde
Cape Verde is an emerging market and at present has very little (but growing) tourism and so there is currently far less demand for rental property in Cape Verde than other more traditional holiday hot spots. However the reason Cape Verde offers such a unique and exciting opportunity to property investors is that the government is dedicated to using the natural factors in Cape Verde to turn the islands into a major international tourist resort in the very near future. This development is already well underway with the completion of the new International airport and direct flights from the UK.
Due to the huge amount of investment and development in Cape Verde it is anticipated (As reported on "A place in the sun" and other major news sources) that in the next few years the Cape Verde islands will be a very popular tourist destination and this influx of tourists will demand a huge amount of rental property both for the tourists and also the work force required to facilitate them. This obviously creates an outstanding opportunity for early property investors to invest in the first stages of the new developments on the islands and buy property at the lowest possible prices off-plan, once the potential of the Islands becomes common knowledge these properties will simply not be available at these prices.
The early investors in Cape Verdean property developments will not only benefit from buying the property cheaply and being able to demand a great rental income from the growing tourist industry the property itself will also appreciate considerably during this period.
Off-Plan Property Investment in Cape Verde
Off-plan villas, townhouses or apartments can be purchased as investment property in Cape Verde, offering beneficial payment schemes which are carefully vetted. In this way investors deal with the most reputable and secure development companies that operate in your favoured location on the Cape Verde islands. Payment schemes currently on offer allow you to buy property off-plan, ie. before or during construction when the price remains low, with average down payments of 30% that can often be spread over 18 to 24 months.
By the time the property is finished, prices rise due to market forces and the greater general appeal of a completely finished property that is ready to move into. Investors therefore sell the property on to another property purchaser and in doing so enjoy some excellent returns on investment whilst never having paid the full purchase price. Analysts are predicting a 70% rise in prices over the next 18 to 24 months for many off-plan properties in Cape Verde.
Investors should however exercise due diligence and choose wisely, making sure their off-plan property in Cape Verde is located in an area where they will resell quickly and easily or where there is a high rental demand for their buy-to-let option. With an off-plan investment, even in the worst case scenario if the property cannot be sold upon completion, the final balance due can often be financed by the developer himself. Furthermore, the rental income may pay off the finance of this loan and yield further eventual return on investment.
How can property be cheaper if bought off-plan – How does it work?
In order to limit financial risk and debts, the developers of any project will wish to sell units off-plan. They understand that if buyers cannot see a physical property at the beginning, they will demand a lower price, while relying purely on the developer’s reputation, the property location, artistic impressions and computer simulations on which to base their decision to purchase.
In addition to the excellent off-plan price, some highly beneficial finance structures are in place. You sometimes need to pay only around 20-40% of the purchase price in the form of a deposit, while the rest is payable upon completion. This may be financed by a mortgage if necessary.
Whether it is an off-plan villa, townhouse or apartment you decide upon in Cape Verde, you will need to build a strategy to adopt in order to achieve your return on investment. Our experts will help you to choose the most appropriate plan, creating an investment programme to suit your needs, whether this is "pure investment" "or buy-to-let " strategy. We will also assist you in finding the most appropriate location in Cape Verde to suit your investment needs.
Maximizing Profit from Off-Plan Investment in Cape Verde
Purchasing early: Prices never remain low for long and, as construction progresses, prices begin to rise steadily. In Cape Verde, as in any other market, it is important to buy your villa, townhouse or apartment as soon as possible during the early stages of development when prices remain very competitive but are already beginning to rise. Early investors will invariably see the greatest returns.
Purchasing the best units: Early purchase of off plan property in Cape Verde allows investors to choose the most sought after properties on any given development. The best units always offer higher capital appreciation in the smallest time frame and can often demand the greatest rental incomes. Penthouses are often firm favourites.
Price increases as development matures: As the development begins to be constructed, the value of the units begins to rise. A completed show home is normally available for viewing at this stage, while buyers are taking less of a risk as they now do not need to rely completely on plans.
Price appreciates as more units sell: As more units are sold, the price of the remaining units rises. Units sell faster when buyers are able to physically see them. There is often a phase payment structure in place which mirrors the increasing value of the properties. To the early investor this means that, should you decide to sell your property, it will be worth considerably more at this stage than when you made your initial purchase and paid the 30% deposit.
Financing Property Investment in Cape Verde
Finance is not yet widely available on Cape Verde. However on some specific projects, a mortgage product is sometimes arranged from an overseas location such as Portugal.
The future availability of mortgage products will have a positive effect on real estate prices throughout the islands. This is an added advantage for today’s early investors as, when finance finally becomes available, the number of buyers able to purchase property on the islands will increase overnight.
In addition, the current non-availability of finance products need not discourage investors from choosing Cape Verde. Release of equity from investors’ other properties, be it in their country of origin or in other investment locations, is often an attractive option to raise finance.
Off-Plan Property investment Finance
Today it is possible to achieve a mortgage upon project completion but this does not help a property purchaser fund an investment.
Therefore, the payment schedule for buying an off-plan property in Cape Verde is very different from a more established market such as Spain which typically offers a 30% deposit and 70% payment on completion. A typical purchase in Cape Verde will include 5 stage payments during the development period of the property. The investor or home buyer will need to fund these payments but has the possibility of achieving a 70% "mortgage" upon the valuation of the finished property when they finally sign the completion documents.
As always, before making a commitment, we recommend you discuss your investment strategy with a lawyer, a reputable property agent with experience in the area and even a financial advisor.
Using Equity Release to Finance Property Investment
Put simply, equity release is a way of releasing some cash from the home without having to sell up and move house. If you have property in your own country and would like to borrow against this in an equity release plan, we can introduce you to independent financial advisors who can help you raise the necessary finance for your investment in Cape Verde.
If you are in your mid-50s or older and own your own home, you may be able to get a cash lump sum, a regular income, or both, by using an equity release scheme based on the value of your property. These schemes can be helpful in certain circumstances to raise money for a mortgage to finance your Cape Verdean property investment.
Taxation of Property Investments in Cape Verde
Various taxes will of course be applicable with your investment property in Cape Verde. Transfer Tax at a flat rate of 3% of the property value will need to be paid before the Purchase and Sale Agreements are signed.
Annual Holding Taxes are paid in April and are set at a flat rate of 3% calculated on 25% of the attributed value of the property. These can be also be paid in two installments in April and September of each year.
Capital Gains Tax is charged if the sale value exceeds a 30% increase from the original purchase price. This is payable within 30 days of the Deed signatures and is taxed at a flat rate of 3%. Along with this payment, the seller must submit a Declaracao de Mais Valias (capital gains statement).
Inheritance or Gift Tax is charged on all property in Cape Verde that is transferred by inheritance or a gift and is taxed at a flat rate of 3% of the attributed value.
Upon purchase of any property in Cape Verde, it is advisable to have a local will drawn up as the law will not be the same as in the UK. Although a non-local will is valid, probate procedures are made far easier if a Cape Verdean will is in place.
Don't Take Our Word For It
Below are some extracts from the "Property Investor News" showing property investment in Cape Verde is gaining popularity.
Investment property in Cape Verde is currently one of the best locations worldwide to purchase property when looking for a good ROI. With the information above its clear to see the potential of these islands and as soon as Cape Verde becomes a mainstream holiday destination the price of property here will almost certainly increase drastically.
Santiago island, which is situated in the Cape Verde Islands, just south of the Canaries is set to become the world's new luxury tourism destination.
With its all year round warmth and sunshine, the exotic Cape Verde Islands, is set to rival the Canaries tourism trade, thanks to the new international airport of Praia, which will begin operating direct flights from Europe in March. Flight times from London, Paris or Amsterdam, for instance will only be 5.5 hours.
"The opening of the new airport puts Santiago on course not only to become a popular tourist hub, but also to offer imaginative British property investors an excellent financial return, and a high-quality environment for their personal enjoyment", says Johnathan Grepne, Managing Director of a Cape Verde based development company."
Summary
It is very widely believed that Cape Verde is currently on the brink of an economic boom. Heavy investment in tourism and increased foreign investment in property create a perfect environment for good returns on investment within this emerging market. With increased direct flight services to Cape Verde from Europe, the islands’ true potential as a mainstream holiday destination is clear to see.
The appeal of being Europe’s first Tropical, Africa-based tourist destination continues to draw increasing numbers of tourists to the islands each year (150,000 per annum 2004) and with increased infrastructure and accommodation available, these figures are expected to soar to 500,000 by 2015
The popularity of Cape Verde is increasing rapidly as investors become aware of its unrivaled potential. If you are interested in the potential market growth in Cape Verde, we suggest you act fast as some of the best priced developments are now already 50% sold, while prices will begin to rise in the very near future. We offer inspection trips to Cape Verde so that members can see for themselves the great potential the islands have for holiday home and large scale property investors alike.