ABSOLUTE gUIDE sERIES to Investment Property
Cape Verde
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Date of Publication: October 2008 © Obelisk 2
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Contents 5. Welcome to Cape Verde
Dedicated to providing impartial information.
6. Economic Growth & Stability
14 - 15. Secondary Market
Cape Verde already has a very healthy holiday rental
Cape Verde has seen strong economic growth since 2000.
market.
7. Currency & Banking
16. Mortgage Market
The banking system is generally sound and well regulated.
8. Foreign Investment Cape Verde has attracted over 100 investment projects with a total capital of US$416 million.
9. Political Situation & Stability Politically stable since the establishment of the multi-party system in 1991.
10. Tourism
Tourism has grown annually by 25% over the last 5 years.
11. Infrastructure Huge investment in the islands’ airports.
12 - 13. Property Market
House prices expected to increase 20% in 2008.
Mortgages are available for foreigners.
17. Market Risks
Cape Verde presents few issues for foreign investors.
18. Purchase Process
Buyers need to sign a preliminary contract and pay a deposit.
19. Investment Costs Notary fees are 3%.
20. Summary
Cape Verde property market has huge potential for growth.
21. Verdict
Cape Verde has undergone a remarkable transformation.
22. Obelisk Advantage Obelisk approaches its projects purely from an investment perspective.
3
A BSO LUT E G UI DE SE RIES - C A P E VERD E
Ribeira Grande Porto Novo
Sao Vicente Pedra Lume Santa Maria
Sao Nicolau Vila de Sal Rei
Gata
Curral Velho
Ville de Assomada Puerto Ingles
Sao Sintra Nova Sintra
4
Praia
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Cape Verde forms part of the Obelisk Absolute Guide Series, dedicated to providing impartial information to numerous property investment destinations worldwide.
Welcome
to Cape Verde
As the market leader for overseas investment property,
provide you with in-depth, clear-cut knowledge on the
we are committed to providing cutting edge information
most important factors influencing your property
for property investors, one aspect that has earned us
investment decision in Cape Verde.
the award of International Property Specialist 2008 by Business Britain magazine.
In this guide you will find details of recent economic performance and predicted growth, a profile of the
We are therefore pleased to present our latest Property
current property market and its future potential, along
Investment Guide to Cape Verde, an essential tool for
with tourism trends and infrastructure improvements.
the investor planning to buy property in this country.
The guide also includes information about Cape Verde’s
This guide forms part of the Obelisk Absolute Guide
mortgage market, the buying process and buying costs.
Series, dedicated to providing impartial information about numerous investment destinations worldwide.
Obelisk’s Absolute Guide to Cape Verde offers investors objective and authoritative information to facilitate an in-
At Obelisk, we are only too aware of the importance of
formed decision about investing in Cape Verde. We trust
extensive research into an investment destination and,
that you, as an investor, will find this guide indispensable.
as part of our policy to offer investors the definitive service, this guide has been rigorously researched to
Here’s to Successful Investing!
5
A BSO LUT E G UI DE SE R IES - C A P E VERD E
GDP Growth (forecast 2008): 7.6% GDP Per Capita (2007): US$3,200 Inflation (forecast 2008): 3% Unemployment (2008): 20% Fitch rating: B+
Economic Growth
& Stability Cape Verde has experienced strong economic growth
Inflation in Cape Verde is, unlike many countries,
since 2000 and in 2006 GDP annual growth
currently low. The rate dropped from 6% in 2006
increased by 10.8%. This fell to 6.6% in 2007, but
to 4.5% in 2007 and experts predict a fall to below
the Organisation for Economic Co-ordination and
3% in 2008. On the other hand, unemployment is
Development forecasts continued growth of 7.6% and
high at around 20%, but government authorities
7% for 2008 and 2009 respectively.
are confident that foreign investment will help reduce this rate.
As a result of Cape Verde’s growing economy, living
6
standards have improved dramatically and in 2007
As a further reflection of Cape Verde’s promising
the country graduated from Least Developed
economic figures, Fitch, an independent credit
Country status in 2007, only the second country to
market evaluation agency, has awarded the
achieve this. Improved education standards and social
country the rating B+, positive. This rating reflects
and political stability have contributed to Cape
Cape Verde’s steady economic growth and good
Verde’s prosperity.
long-term credit prospects.
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Currency
& Banking Cape Verde’s currency is the Cape Verde escudo (CVE), currently pegged to the euro at the rate of €1 to CVE 110.265. Despite this fixed peg, the escudo’s exchange rate has depreciated, a factor that has added to the attractiveness of Cape Verde as a tourist destination. Reform of the banking system in Cape Verde was introduced during the 1990’s with the result that the system is now generally sound and well regulated. Banking is dominated by 2 of the country’s largest banks – Banco Comercial Atlântico and Caixa Económica de Cabo Verde (both majority owned by Portuguese banks) – who between them, control 89% of the country’s banking assets.
7
A BSO LUT E G UI DE SE R IES - C A P E VERD E
“Hilton Hotel will become the first upscale international brand to operate in Cape
Verde, a region with encouraging economic and tourism growth projections.” Jacques Monnier, CEO of Hilton Hotels Turismo SA.
Foreign Investment Since 1993, when the Cape Verde government
projects will create at least 15,000 new jobs in several
introduced a simplified registration process for foreign
sectors such as construction, transport, hotel and
companies, foreign direct investment (FDI) has increased
tourism.
considerably. The islands have attracted over 100 investment projects, generating a total capital of
Cape Verde has an increasingly enhanced investment
US$416 million. By June 2007, the total investment
climate and in Transparency International’s Corruption
capital was estimated to have reached US$715 million
Perception Index, the country ranked 49 in the world
with the majority of FDI coming from Portugal, the UK,
and was the 3rd least corrupt country in Africa (behind
Italy and Spain (principally the Canary Islands).
Botswana and South Africa).
Cape Verde has several attractive investment
A reflection of Cape Verde’s consolidation as a FDI
incentives such as 100% tax exemption on all dividends
destination is found in the forthcoming investment by
and reinvested income during the first 5 years of
Hilton Hotels in a 268-room hotel in Santa Maria on Sal
company operation. After the initial period of 5 years,
Island. Due to open in the second quarter of 2010, the
the tax is payable, but at the low rate of 10%.
hotel is the first in Cape Verde owned by a high profile international company.
FDI has contributed considerably to the islands’ economy and the government forecasts that FDI-funded
8
ABSO LUTE GUID E SE R IE S - CAPE VERDE
WTO Member: Since July 2008 EU Special Partnership Status: Since 2007 Political System: Multiparty democracy Ruling Party: Partido Africano da Independência Next General Election: February 2011
Political Situation
& Stability Cape Verde is politically stable having established a multi-party system in 1991. The current President is Pedro Pires, elected in 2006, and the government is headed by Prime Minister, José Maria Neves of the Partido Africano da Independência, also elected in 2006. The next legislative elections are expected in February 2011. In July 2008, Cape Verde became a member of the World Trade Organisation, confirming the islands’ continuing economic progress. In October 2007, the EU granted Cape Verde ‘Special Partnership Status’, an alliance that is expected to lead to co-operation in trade and investment, and an upgrading of Cape Verde’s institutions and regulations.
9
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Tourism Contribution to GDP (2008): 27.5% Tourism Contribution to Employment (2008): 25%
Tourism Travel and tourism are hugely important to the Cape Verdean economy. According to the World Travel and Tourism Council (WTTC), tourism in Cape Verde will contribute 27.5% to the country’s GDP in 2008, a figure that is expected to rise to 31.5% by 2018. WTTC statistics also point to the tourism sector accounting for 25% of total employment in 2008, which is predicted to increase to nearly 30% in 2018. Tourism has recently seen significant growth and has experienced an increase of 25% annually for the last 5 years. Current figures stand at over 183,000 visitors annually and Cape Verde officials expect to reach the benchmark figure of 1 million tourists by 2015. Cape Verde ranks 29th in the world (out of 176 countries) for long-term forecast growth of the travel and tourism sector. Furthering Cape Verde’s tourism potential is the construction of the islands’ largest tourist complex, Santiago Golf Resort on Santiago Island. The complex, based around a Nick Faldo golf course, will consist of 5 hotels and 3,000 apartments, representing a €550 million investment.
10
World/European Ranking: 29/ 176 countries for growth potential
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Infrastructure Modernised airports with direct air routes to the UK US$238 million from The World Bank €51 million from the European Development Fund Cape Verde is a major recipient of funds from both the
have been upgraded, Praia Airport has recently been
World Bank and the European Development Fund.
remodelled with a new runway and passenger facilities,
The World Bank has allocated around US$238 million
and an airport has been opened on Boa Vista Island. On
funding for a total of 21 projects in Cape Verde. Funds
São Vicente Island, an airport has been built and is due
from the European Development Fund amount to €51
to open in the near future.
million for the period 2008 to 2013 for investment in economic growth strategy and poverty reduction.
Improvements to Cape Verde airports have led to strong growth in air traffic – passenger numbers have grown by
Infrastructure improvements include huge investment in
an average of 7.5% annually over the last 7 years – and
most of the islands’ airports to upgrade and modernise
new flight services have been introduced such as direct
facilities. At Sal Island Airport, the runway and terminals
flights to the islands from the UK.
11
A BSO LUT E G UI DE SE R IES - C A P E VERD E
“According to the Telegraph, property prices rose by 20% during 2007 and are set to see similar increases in 2008. Capital Growth (2007): 20% Average Annual Rental Yield: 5% – 8%
12
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Property
Market
Among the many emerging markets, Cape Verde is a
house buyers are choosing off-plan projects, with
relatively new property investment location and as the
those on Sal Island currently proving the most popular.
islands’ attractiveness as a holiday destination increase
However, with the opening of international airports on
so does its property market. Cape Verde officials
other islands, it is expected that demand and growth
positively encourage foreign investment in real estate
of the property market is likely to expand into areas
and there are several tax incentives for the buyer such
such as Boa Vista, Santiago and San Vicente over the
as low capital gains tax. This is reflected in the property
long-term.
boom currently taking place in the archipelago. At the other end of the market, there are many According to the Telegraph, property prices rose by
larger-scale projects to invest in, such as the
20% during 2007 and are set to see similar increases
extensive luxury resort developments currently
in 2008. However, because of Cape Verde’s emerging
under construction. Palm View on Boa Vista Island
market status, property is still considerably cheaper
is one such example. One of the world’s very few
than comparable destinations. As the property market
6 star resorts, this luxury project is expected to increase visitor numbers to Cape Verde as well
matures so does the quality of construction and the
as enhance Cape Verde’s potential for property
choice of properties available to the investor. Many
investment.
13
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Secondary
Market
14
A fundamental factor behind the growing property
Resale potential in Cape Verde is not so good. Poverty
market is the country’s fast-growing tourist industry. The
levels are high and there is a poor local secondary
steady annual increase in visitors has already led to
market. The amount of new construction means foreign
the construction of new airports and the introduction of
buyers currently tend to invest in off-plan property for
direct flights from the UK.
buy-to-let rather than resale.
With a year-round pleasant climate, it is easy to see
To protect property investors, the government has
Cape Verde’s attractiveness as a tourist destination.
established a regulatory body, Cabo Verde Iniviativ SA
This translates to an increase in demand for holiday
(CVI), whose objective is to protect investors’ interests.
accommodation. Cape Verde already has a healthy
The authorities are keen to ensure that mistakes made in
holiday rental market and this is set to continue in the
other emerging markets such as illegal sales and
near future. Net rental yields are between 5% and 8%.
building without planning permission are not made.
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Cape Verde’s climate virtually guarantees investors a year round rental income.
15
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Mortgage
Market Although Cape Verde’s mortgage market is currently small, it is one with huge capacity for growth and it is expected that the choice of products will increase substantially in the near future. Mortgages are readily available to foreigners and residents, although all applicants have to meet the bank’s eligibility criteria. Mortgage interest rates start at around 8.5%, a higher rate than that found in many other countries, but it is believed that the ever-increasing demand for mortgages in Cape Verde will soon lead to a significant drop in mortgage interest rates. Mortgages are usually available for up to 25 years. Amounts available to borrow depend on affordability or up to 75% of a property’s value. Repayment and interest-only mortgage options are available in Cape Verde, but investors will find the range of mortgage products very limited compared to those available in the UK and Ireland. Alternatives to mortgages in Cape Verde include remortgaging or releasing equity from other properties you own.
16
ABSO LUTE GUID E SE R IE S - CAPE VERDE
“The country has recently seen significant improvements in infrastructure, particularly as far as airports are concerned. Substantial funding for infrastructure has been provided by the EU and the World Bank.”
Market
Risks
Property investment into emerging markets may carry
Development (IFAD). Financial aid from IFAD for
some degree of risk. However, the degree that market
Cape Verde’s rural communities has already reached
risk in a particular country affects a property
US$13.5 million.
investment depends largely on thorough due diligence conducted prior and during the purchase process.
Poor infrastructure is another problem in Cape Verde, which depends on foreign investment and international
One of Cape Verde’s main challenges is that although
aid for infrastructure improvements. However, the
it no longer has least developed country status it is
country has recently seen significant improvements in
still very much a developing country. Poverty affects a
infrastructure, particularly as far as airports are
large section of the population. The islands suffer
concerned. Substantial funding for infrastructure has
frequently from low rainfall or drought, which means
been provided by the EU and the World Bank.
that agricultural production falls and the islanders become dependent on foreign food aid.
At a time when many countries are affected by the global credit crunch, Cape Verde remains relatively
However, Cape Verde is addressing its poverty with
unaffected. Economic growth is strong and this looks
some success and its drive to eradicate poverty has
set to continue – with GDP increase predictions of
been boosted by funding and loans from the United
7.6% and 7% for 2008 and 2009 respectively, Cape
Nations International Fund for Agricultural
Verde is one of the world’s better investment prospects.
17
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Purchase Process Cape Verde laws and legal processes may be very different to what you are used to and Obelisk strongly recommends that independent legal advice be taken during a property purchase. Below is the standard purchase process in Cape Verde and issues that may affect a property purchase: Foreign nationals are freely permitted to purchase residential properties on the Cape Verde islands. A tax card must be obtained from the Local Tax Office. A lawyer can obtain this on the buyer’s behalf along with a Power of Attorney if required. Both parties sign a promissory buying and selling contract, the buyer pays a deposit, usually between 10% and 30% of the property price. The lawyer obtains a Land Registry Certificate, Tax Information Certificate and a map displaying the exact location of the property. If the properly is not registered, the lawyer must acquire 2 certificates –Certidao pela Negativa and Certidao Matricial Para o Efeito. These certificates are essential in order to register the property. Both parties sign the title deeds (Escritura) in the presence of a notary public and the buyer pays the appropriate taxes as well as the balance of the price. Title is then transferred to the buyer, a process that takes around 3 to 4 weeks.
18
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Investment Costs Cape Verde taxation is complex and subject to change. You are therefore recommended to take expert and up-to-date advice on taxation issues affecting the purchase and ownership of property in Cape Verde. The costs of a standard property purchase in Cape Verde may include the following: Notary fees are 3%. Property tax is levied annually at the rate of 0.075% of the property’s value. Income gained from rental is taxed as income tax at the rate of 20%. Capital gains tax (CGT) is levied at a flat rate of 3%. However, CGT is only payable on properties that have increased in value by 30% or over and on land whose value has increased by 100% or over. Registration Fee at 2%. Sales Tax of 3%.
19
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Summary The following summary provides key highlights to consider when investing in Cape Verde’s property market: Cape Verde has seen high annual GDP
Cape Verde is a major recipient of World Bank
growth since 2000 and has a predicted
and EU funds for infrastructure improvements.
increase of 7.6% for 2008. Huge investment has modernised and The depreciation of the escudo has added
upgraded the islands’ airports.
to the attractiveness of Cape Verde as a tourist destination.
Property prices rose by 20% in 2007 with a similar figure expected for 2008.
Foreign investment reached US$177 million in 2007.
Luxury developments are under construction such as Palm View, one of the world’s few
The government forecasts that foreign
6 star resorts.
investment will create 15,000 new jobs. Investors can expect net rental yields of Cape Verde has ‘Special Partnership
between 5% and 8% a year.
Status’ with the EU. Cape Verde presents few market risks for Tourism has been growing rapidly with a
the property investor.
25% annual increase over the past 5 years Foreigners are freely permitted to purchase Officials expect to receive 1 million tourists
property.
per year by 2015 The registration process takes between 3 to Mortgages are available for foreigners.
20
4 weeks.
ABSO LUTE GUID E SE R IE S - CAPE VERDE
The Absolute Guide Series Rating
Based on our extensive research, Obelisk has introduced a 5 star rating system to summarise the investment potential of a country. The availability of finance, economic stability, political stability, the strength of the local market to provide an exit strategy and the potential to earn from investment are the key criteria that determine the investment grade of each country.
Verdict Since the introduction of a multi-party system and democracy in 1991, Cape Verde has experienced a remarkable transformation. One of the most remarkable achievements seen by Cape Verde is its graduation from least developed country status in December 2007, only the second country in the world to do so. The increase in tourism and foreign investment in Cape Verde has also greatly improved standards of living. However, Cape Verde is still essentially a poor country and this poverty means that locals cannot afford housing. One of the major obstacles faced by foreign investors is therefore the lack of local resale market. Cape Verde’s status as developing country does present some problems for the property investor and, as with all emerging markets, we highly recommend that the investor undertakes thorough due diligence before purchase. The complex and changing legal and taxation systems in Cape Verde mean you should always take expert advice in these fields. Based on thorough research we have carried out on Cape Verde, we at Obelisk believe that Cape Verde presents a fair investment opportunity for buy-to-let properties but considerably less so for capital growth.
21
A BSO LUT E G UI DE SE R IES - C A P E VERD E
Obelisk
Awards Obelisk ‘International Property Specialist 2008’
Advantage
Voted International Property Specialist of the Year 2008 by Business Britain magazine, Obelisk has been recognised as the authoritative voice within the industry and its clients benefit from the company’s uncompromising high standards and professionalism. Obelisk has identified a simple and transparant purchase process for its clients as a simple, four step process: 1.
The client chooses and reserves the unit that best suits their investment requirements, and Obelisk takes the client through a compliance procedure.
2.
An independent lawyer, sourced and appointed for the client by Obelisk, will have already carried out full due diligence on the project. They will issue all purchase contracts and paperwork to the client.
3.
On receipt of this contract, the client will sign and make the first payment. The lawyer will notify the client of all further payments when required.
4.
The appointed lawyer will also represent the client in all aspects legally required within the country of purchase, ensuring that clients of Obelisk enjoy the benefits of simple and hassle-free real estate investment.
For more information about Obelisk’s investment opportunities in Cape Verde, contact us now on info@obeliskinternational. com, visit our website at www.obeliskinternational.com or call us FREE on 0808 160 0670 (UK) or 1800 932 514 (IRE).
22
ABSO LUTE GUID E SE R IE S - CAPE VERDE
Disclaimer The material contained within this document has been prepared for information purposes only. Information contained herein is not to be relied upon as a basis of any contract or commitment. The information is not to be construed as an offer, invitation or solicitation to invest and opinions expressed are based on market conditions at the time of print and may be subject to change without prior notice. Information contained herein is believed to be correct, but cannot be guaranteed. In case of queries or doubt you should consult an independent investment adviser. No personal recommendation is being made to you and the past is not necessarily a guide to the future. The brochure in its entirety – text, images, marks, graphics, logos, buttons, combinations of colours, and the structure, selection, ordering and presentation of its content – is protected by the legislation on intellectual and industrial property, it being forbidden to reproduce, distribute, publicly disseminate or transform it, except for personal private use. It is also forbidden to reproduce, relay, copy, assign or broadcast, in whole or in part, the information contained in this brochure, for whatever purpose and by whatever means, without written consent.
23
Call us free from UK: Tel. 0808 160 0670 Call us free from Eire: Tel. 1800 932 514 For general and international enquiries contact us at: Tel: (0034) 952 820 319 Fax: (0034) 952 825 790 Alternatively you can email: info@obeliskinternational.com or visit: www.obeliskinternational.com