Investment Strategies For Cape Verde

The Cape Verde islands are a promising property investment location in its early stages of growth. Here we describe what factors make a property purchase on the islands a highly recommended option, and which investment strategies we recommend to potential buyers in Cape Verde.

General Factors

As with many emerging property markets, a steadily developing tourist industry is integral to success and the Cape Verde Islands make no exception. Home to mile upon mile of sandy tropical beaches, Cape Verde is well equipped to become a top tourist destination, and with a location between the Tropic of Cancer and the Equator, the Cape Verde Islands are the closest tropical islands to Northern Europe, at only approximately 5 ½ hours flight time from the UK. Although Cape Verde is still a developing market, it already boasts a surprisingly strong tourist trade, with many Dutch, Italian, Portuguese and Scandinavians making it their annual holiday destination. According to market analysts, Cape Verde is currently undergoing similar growth trends as the Canary Islands did some thirty years ago.

Cape Verde offers investors multiple islands and therefore multiple investment options to choose from, with each island being at a different stage of development. Prices have increased steadily on the island of Sal over the past 18 months, where the majority of development and interest has been centred so far. Meanwhile other islands such as Boa Vista and Sao Vicente are closely following Sal’s footsteps. These islands currently offer lower prices, and although investments on these islands are possibly a higher risk, they do bring with them enhanced investment potential. Major projects are due for release on these islands from the second quarter of 2007, which will offer excellent quality facilities in prime locations, at outstanding prices.

The largest island of the Cape Verde group is Santiago, and is home to the capital city; Praia. At the present time however, there is a lack of good investment product here. The coastline of Santiago is rocky as opposed to miles and miles of beach, and any investors looking to purchase on the islands should really be looking to beach front property for their purchase. In much the same way as the Canary Islands were transformed some 30 years ago, it was Tenerife which was developed first as it had the best tourist conditions in terms of natural factors and ease of access. The same can be said of Sal in Cape Verde. The economy is predicted to grow in line with Sal’s popularity as a destination, which shall create revenues to invest in the infrastructure on islands such as Santiago, which is relatively industrial and the most heavily populated of the islands.

The islands of Sal and Santiago have international airports, with Sao Vicente and Boa Vista set to follow over the next 2 years. With more flights to arrive in Cape Verde, including direct TACV services from the UK, the Islands are offering strong potential as tourist destinations.

As highlighted previously, it is highly recommended that any property investment made on the Cape Verde islands should be located as close to the beachfront as possible. Essentially a beach holiday destination, Cape Verde attracts visitors who will always favour seafront properties with beautiful views and easy beach access, and selling on your investment at a later stage shall be a great deal easier to achieve if your unit(s) are on the beach, as opposed to being based on a second or third line resort.

It is true that new quality projects have been slow to be released during 2006, but patience is required of investors who are willing to wait for the most effective investment properties to become available. The forthcoming Dunas Beach, Tortuga Beach and Cabonuba resorts are all set to be hugely popular with investors who have waited a few months for these next prime investment projects.

Economic Factors

During the 1990s, Cape Verde suffered from severe droughts which cut its annual harvests by an immense 80%. This disaster lead to appeals for international aid and, as of 2006, food production on the islands has still not returned to pre-drought levels, while the annual cost of Cape Verde’s imports continues to far exceed the value of exports. Farming is the islands’ main economic activity, although the industry continues to be hampered by low annual rainfall and extensive soil erosion. This explains the government’s current vigour to improve the economy through strongly promoting the tourist market as an alternative source of revenue.

Tourism is predicted to become Cape Verde’s largest economic sector within the next three years and at present it contributes 10% of the national GDP. Foreign tourist numbers continue to rise by around 22% per annum, while the government targets an annual benchmark figure of 1 million arrivals by the year 2015.

Cape Verde’s GDP is $3.055 billion per annum (end 2005), according to The exchange rate of the Cape Verdean Escudo is fixed to the Euro, which can conveniently also be used as currency throughout the islands.

Real annual growth in the economy is currently encouraging at 5.5%. However, this growth does not reflect capital appreciation in property investments, which can reach 25% per annum in carefully selected locations.

Political Factors

The Cape Verde islands gained independence from Portugal in 1975 and are considered to be amongst Africa’s most stable democracies. Cape Verde is now a Parliamentary Representative Democratic Republic, with a Prime Minister as head of the Government and a President as head of State. The Islands’ first free presidential elections took place in 1991.

The current President, Pedro de Verona Rodrigues Pires, is a veteran of the successful independence campaign of the early 1970’s and was re-elected in the 2006. He is committed to encouraging foreign investment to Cape Verde and currently promotes the selling of government owned plots of land as priority to overseas developers. Pires uses the tourism success of the Canary Islands as a blueprint for the future success of Cape Verde.

Natural Factors

Visitors are captivated by Cape Verde’s 900km of white sandy beaches that make it a perfect beach holiday destination.

Temperatures remain almost constant throughout the year, with average temperatures of 24ºC in January and 27ºC in September, making for an ideal year-round buy-to-let and tourist destination.
Meanwhile, average annual rainfall in Cape Verde is 68.4mm, almost half of which is accounted for during September, the wettest month of the year. Although the islands are considered to be Tropical, the landscape is far from luscious, with dramatic, barren, almost lunar-like terrain.

Logistical Factors

Cape Verde is approximately 5½ hours flight away from the UK and other parts of Northern Europe, making it an ideal medium haul holiday option. Home to two international airports on Sal and Santiago islands, the vast majority of Cape Verde’s air traffic uses Sal Amilcar Cabral International Airport. Having only just launched UK-Cape Verde services, TACV is set to expand its operations over the coming months, subject to increased demand. Shuttle services between the main islands exist from the national flag carrier TACV. For those wishing to take a more tranquil route or explore some of the lesser known islands, ferry crossings are widely available.

For now the road network on Cape Verde is considered to be poor, although this poses little problem for tourists who get off the plane and travel directly to their resorts where they stay for the duration of their trip.

Despite the fact that no specific government plan is in place, as can be found in other emerging markets, there is still a great deal of work underway to improve every aspect of the infrastructure in Cape Verde. Meanwhile, as the Cape Verde tourism/property boom is still in its infancy, investment in the infrastructure is destined to increase appropriately and in line with eventual growth in tourism.

Short Term Investment Strategy

Key Opportunity

As the closest tropical destination to the UK, Ireland and Northern Europe, Cape Verde is fast becoming a firm favourite amongst European investors. In fact Cape Verde has been the most in demand location over the past 12 months, attracting much interest from experienced as well as first time emerging property market investors looking to combine good returns with an idyllic holiday retreat. As the islands develop, we expect to see a huge increase in interest from even more overseas investors.

The beauty of investment on these islands is the fact that Cape Verde is starting from a virtual ‘blank canvass’ and presents outstanding scope for future growth. As in all emerging markets, the sooner investors commit the better. Many investors who have already made their purchases on the islands have bought into a small selection of projects, both on front line beach plots and further inland. Over the next 12 months a steady new flow of excellent up and coming beach front projects will drastically increase investors’ choice. We now have our eyes on prime beach front projects, due to be available in the second quarter of 2007. Beach front locations will always be in high demand for years to come, particularly as one of Cape Verde’s main selling points is its great attraction as a beach lover’s paradise for both property purchasers and tourists alike.

As development continues, Cape Verde is set to generate increased interest from America due to its location only 5½ hours from the Eastern Seaboard, adding further potential to investors relying on strong tourist returns. We believe front line beach projects are THE ONLY place to purchase for short term investors in Cape Verde. These properties attract the greatest number of end users at the earliest opportunity.

Short term investors should note however, that mortgages on Cape Verde property are still not generally available. This means the full purchase price needs to be available for off-plan purchase prior to resale in the event that the predicted exit strategy is not met. To cover all possible eventualities, short term investors are strongly advised to obtain advice on finance before proceeding.


Average construction time on Cape Verdean projects is 24 months, while for best returns, clients looking for a short term investment should look at an average investment term of between 12-18 months from reservation to resale.

Payment terms on Cape Verde property projects require the full purchase price to be paid during the course of construction, as finance is generally not yet available. Payment terms of 5 x 20% can normally be expected on the majority of developments, although better payment terms are anticipated over the coming year as Cape Verde becomes more established and competitive as a developing market.

Contracts are assignable at various stages, depending on the developers. Investors will also need to factor in any administration charges associated with selling prior to completion.

Level of Complexity

Short term strategies are highly attractive in Cape Verde today. They are a tax efficient way of investing, as purchase tax is payable only upon completion of the property sale, by which time the buy-to-flip client should have successfully made a sharp exit from the investment. The ‘flip’ may take place at any stage after signing the purchase contract and paying the first deposit, however this should again be clarified with the developer.

Added advantages are that there are no ongoing property costs applicable in terms of property management and, due to the very nature of a flip strategy, this is a simple capital investment. Provided you sell prior to completion, there is no need to purchase or go through with finance arrangements.

Risk Assessment

As with any short term investment in an emerging market, investors must ask themselves how a buyer will be attracted specifically to their particular property when there is so much other construction underway. They will need to ask: what is the competition? Is there an oversupply of existing properties and construction in this location? Is their unit type and situation one of the best? What facilities are in the area? On a purpose built tourist resort, there should always be multiple facilities on-site. The investor also needs to be sure their investment is not in the middle of nowhere.

Selected unit(s) need to be in a prime location to attract buyers fast, i.e. a corner unit on frontline beach or golf, or even a penthouse with outstanding views. Remember, the more outstanding the unit, the lower the buy-to-flip risk.

Investors should also bear in mind when considering a short term strategy, that Cape Verde is still an investors’ market. Completion of new airports, roads, hotels and tourist facilities will begin in around 18 months to 2 years time. The enormous volume of ongoing construction in Cape Verde is unavoidable for the next few years. End user buyers will be buying throughout this initial development phase and will be looking for the best completed properties on the market. So will your unit stand out from the rest?

A final word of warning: if a buyer is not found prior to completion of the property, the investor needs to be confident they can continue to completion and adapt their strategy comfortably.


Capital appreciation potential is at its highest level early in the investment market. Cape Verde first attracted investors’ attention back in early 2005, when property prices were even lower than they are today. Today however, the quality and locations of new projects have improved significantly, which in some way compensates for capital appreciation which may have been missed - a new unit could well be of greater appeal to an end user than those completed some time ago.

All market indications show that prices will only increase further from current levels and with capital appreciation widely expected to rise by 70% over the next two years, this trend is set to continue.

The potential returns on the Cape Verde islands are far greater for mid to long term investors. Appreciation will inevitably accelerate in 2009 when major infrastructure and tourist industry advances will be near completion. Cape Verde is well on its way to becoming a major tourist destination and with construction underway and international exposure on the increase, the islands currently sit on the brink of an exciting new future.

Please see the example below

  • An investor decides to purchase a 1 bedroom unit on Dunas Beach Resort (March 2007) for 89,950 EUR.
  • A reservation fee of around 3,000 EUR is paid to reserve the unit.
  • Legal checks are then carried out during a 30 day period after which a 35% deposit payment is made and the private purchase contract is signed. The deposit amounts to 31,482.50 EUR plus expected legal costs (at this point approx 1,000 EUR).
  • The second stage payment of 10% is completed (8,995.00 EUR) nine months after the signing of the private purchase contract.
  • After year one of the investment, capital appreciation realises 20%* for the year, making the property value now 107,940.00 EUR.
  • The investor decides to instigate an exit strategy after 16 months (just prior to completion), while capital appreciation continues to perform at 20%* per annum, meaning the property is now valued at 109,739 EUR.
  • The investor finds a buyer before proceeding to purchase contract, 16 months into the investment.
  • Total capital invested 41,477.00 EUR (inc. legal fees).
  • Balance remaining on purchase 49,474.00 EUR
  • Sale price 109,739 EUR
  • Having re-assigned the contract to the end user without charge, the total return on investment using this short term strategy over only 16 months is 18,789.00 EUR, representing an excellent return on capital invested of over 45%.


This short term investment strategy is purely based on capital as little or no finance options are available in Cape Verde at the present time. Local banks are currently geared towards large- scale lending but this situation is expected to improve over the next year. If necessary, we can help you arrange consultations Equity Release schemes to release capital from existing property elsewhere.

Investors MUST cover all eventualities and be confident that they can complete the purchase if necessary.


Income earned from property in Cape Verde is taxable whether the investor is resident or non-resident on the islands. A flat rate tax of 3% of the attributed value is to be paid prior to the execution of any purchase and sale deeds

Capital Gains Tax is payable if the investment value exceeds a 30% increase on the initial purchase price. The capital gain is taxed at a flat rate of 3% and must be paid, together with the submission of a "Declaracao de Mais Valias" (Capital Gains statement), within 30 days of exchanging the Deed of Sale.

Property purchase tax is not chargeable on a short term investment, as the investor never actually takes on full ownership of the property by signing the completion documents.

Medium to Long Term Investment Strategy

Key Opportunity

In line with increased development and a surge in visitor numbers, strong capital appreciation is predicted to continue on the Cape Verde Islands for at least the next three to five years. As ever, the earliest investors always gain the greatest capital appreciation on their investments.

Strict building height restrictions on frontline locations in Cape Verde will maintain the mood of an exclusive destination for many years to come, without turning the resorts into those familiar ‘concrete jungles’ as seen in other destinations.

Off-plan prices remain relatively low at the present time, with some of the best investment projects being concentrated around prime beach front locations. Many developments on Cape Verde have however been constructed away from the beach front which has reduced their investment appeal. Always remember the vast majority of end-user clients will prefer to purchase beach front projects rather than those located behind the beach.

For purchasers investing in the holiday rental market, demand in prime locations is strong, particularly for properties around the resort of Santa Maria on Sal. Sal is targeted to undergo enormous investment in its tourist amenities, infrastructure and resorts over the next few years. A handful of developments are also in planning stages for Sao Vicente (as of early 2007), which is predicted to be the next island to attract major interest from investors. Islands such as Santiago, Boa Vista and Sao Vicente are up-and-coming while perhaps a little more risky than Sal, as their visitor numbers are far lower at this point in time. Running costs for an apartment on Sal for example are low - you can expect to pay monthly community fees of anywhere between 100 EUR and 200 EUR, which should be covered by generated rental income.

Cape Verde is already attracting healthy tourist numbers mainly from Italy, Holland and Scandinavia who form the majority of foreign visitors. However, with the recent introduction of direct flights from UK and Ireland, we expect visitor numbers from these and other origins increase.


Average construction time on Cape Verdean projects, from project sales release to completion of construction is between 2 and 2½ years.

With no finance yet available in Cape Verde (or at least until after completion of the build), full payment takes place over the course of construction. Investors can expect to see healthy rental returns on their investment unit within 2 years, subject to location. This timing will conveniently coincide with the completion of major tourist facilities and improvements to the infrastructure and transport links from overseas.

Cape Verde is highly recommended as a mid to long term investment. Although returns can be achieved on a short term investment strategy, the potential for far higher gains are realistic for a longer term exit plan. Capital appreciation is expected to perform exceptionally well over the next 5 years, so the longer investors are able to leave capital in their purchase, the higher their potential returns.

This is the ideal time to invest in a market such as Cape Verde. The temptation is often to wait until flights are more regular and the new infrastructure has been completed, but by this time the best gains will have already been made by the shrewd investors who are acting now.

Level of Complexity

Full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, of between 7% and 9% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also be payable. Some of the best arrangements are to be made with property management and rental companies that are often conveniently based on site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Maintaining a property on the islands thus becomes no more complex than an investment closer to home.

Bear in mind you will need to open a bank account in Cape Verde in order to pay for utilities and other ongoing expenses and full records of receipts and payments will need to be maintained in order to meet local taxation requirements.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term investment, which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience is sometimes required until the end user is found.

The increased exposure the Islands have recently received and the intensive development currently underway means an inevitable increase in the number of visitors to the Islands over the coming 5 years from 2007. This translates to an increase in end user buyers on the one hand but brings with it increased competition on the other.

Bank Guarantees are not commonly given by developers in Cape Verde, but the best developments will have still these in place to protect investors, be they local bank guarantees or guarantees provided from overseas banks, most often from Portugal, with whom Cape Verde has a historically close connection.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership is 100% freehold, leaving no room for ownership disputes.


Today, in the first quarter of 2007, Cape Verde can still be described as an ‘emerging’ market, despite having been promoted as such for the past 2 - 3 years. Property prices continue to be very low and reflect Cape Verde’s status as a developing nation.

Capital appreciation in Cape Verde has been set consistently at around 20% over the past 2 years, but experts predict it to increase dramatically as quality new projects are released and improvements to the infrastructure are introduced. Conservative growth forecasts from various sources for the next 2 years now indicate annual levels of between 20 and 30%.

Increased worldwide exposure will also have a positive effect on Cape Verde, bringing with it an anticipated boom in tourist numbers. Meanwhile, the corresponding interest received from investors wishing to purchase property on the islands makes for a substantial tourist rental market in the making.

The competition between investors to secure prime units on Cape Verde is quite considerable. Cape Verde has been one of the most consistently requested destinations over the past 2 years, with over 4,000 enquiries registered since January 2006 - upon release of the new projects, every one of these will be potential investors.

Please see the example investment below*

An investor decides to purchase a 1 bedroom unit on the Dunas Beach Resort (March 2007) for 89,950 EUR.

The investor pays 35% deposit upon signing of the purchase contract after 30 days of 31,482.50 EUR plus expected legal costs at this point of approx 1,000 EUR.

The second stage payment is completed of 10% (8,995.00 EUR) nine months after the signing of the private purchase contract. There is now nothing more to pay for a further 15 months until completion.

After year one of the investment, capital appreciation has realised at 20%* for the year, meaning the property is now valued at 107,940.00 EUR

Two years after the property is reserved, the investor proceeds to private purchase contract, and settles the remaining balance of 49,472.50 EUR, representing 55% of the purchase price.

Also at this stage, the investor must pay the costs of sale which include lawyer fees, notary costs, etc. This should total up to approximately 8% of the property purchase price, in this case 7,196.00 EUR. Subtracting the 1,000.00 EUR already paid in legal fees, leaves costs to be settled of 6,196.00 EUR.

Total capital invested is 97,146.00 EUR

Capital appreciation in the two years since making the original reservation has been steady at 20%* per annum. Upon receipt of the keys, the property value is 129,528 EUR.

The investment is maintained by the client for a further year, with growth in this time increasing by a further 20%.

The investor sells their unit for 155,433.00 EUR after year 3 of the investment, representing a return on capital invested of 64.75% (58,287.00 EUR)*

*This is a simple example without taking potential loan arrangements/costs, ongoing property management and rental returns into consideration. Growth over this period will of course change from year to year, but initial conservative estimates have been used for the purpose of this example.


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.


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.

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