Hi Jake,

I immigrated to Australia (from SA) 26years ago and have lived mainly in Perth (but also Brisbane, Melbourne and Sydney).

I'll be going to Cape Town to look at Property in December 2009, so my advice is to consider the following:

1) the ZAR/DOLLAR exchange rate,,,,, is it likely to move in favour of the Aussie (meaning that the Aussie will strengthen) over the next 12-18 months (say), making property cheaper for you to buy? How will SA property increases negate that?
Negligible?

2) When you make an investment in a foreign country, you must consider where you'll hold your debt (your asset will obviously be on foreign land) and where you will gain your income. This has mainly to do with exchange rates (see some combination below in 3)

3)
a) Asset in SA, debt in SA (assumed fixed in all cases), all income in SA - No adverse currency movements, no adverse interest rate movements.

b) Asset in SA, debt in SA, income from Australia - great if ZAR weakens. Otherwise, potential payment problems.

c) Asset in SA, debt in Aussie, income from Australia - no currency effect on payments, but potential Capital losses on weakening ZAR


There are more combinations to add to the above, but my point is this, you need to consider:

a) Where you hold your debt and your income to service that debt
b) What the interest rate differentials are between SA and Aussie (recently 15% in SA, 7% in Aussie at the equivalent time). I realize that it’s different now.
b) How long will you keep your investment?
c) Management and ability to rent out, if you leave and cannot sell.
d) Who'll buy your property (does property appeal to foreign buyers or just locals).

Regards Glenn