PROPERTY INVESTMENT

Indian Ocean property paradise produces sparkling returns for wealthy buyers

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A marina development that caters for wealthy travellers looking for a scenic, safe spot to moor yachts off the east coast of Africa has produced sparkling returns for property investors. 

Villas and apartments at Eden Island, part of the Seychelles archipelago near the equator, have increased in value at an average rate of about 8% a year in US dollar terms, in some cases doubling investors’ money within seven years. 

A one-bedroom apartment bought for US$255 000 in 2007 (at 2007 exchange rates: about R2m; £125 000; €185 000) recently changed hands for US$450 000 (R5m; £270 000; €325 000). The first four-bedroom villa, which went for $2,5m five years ago, was resold this year for US$3,8m. New units are on offer at similar prices.

Yields generated through the resort’s rental pool, meanwhile, are delivering three to nine percent, depending on financing arrangements and letting agreements, says resort developer Eden Island Property Development Company (Seychelles) Ltd.

More than 450 of the 580 planned new homes have been sold in the development, launched in 2006, with one in four owners buying additional units for investment purposes, says Peter Smith, Eden Island’s marketing and sales director.

Around 40% of buyers are South African residents who want to have a holiday home in an unspoilt and secure tropical environment which has good weather all year, he notes. Eden Island resort has also been a beneficiary, like London prime property, of a global flight of capital from emerging markets to “safe haven” assets in the past six months. 

“We are seeing increasing interest from countries like Russia and elsewhere where buyers are looking to preserve their wealth in US dollars in freehold bricks-and-mortar outside their home countries,” says Smith of interest registered through website enquiries as well as agents. A total of 31 different nationalities are represented among current owners, with about 27% from Europe, including the UK, France and Italy, 6% from the UAE and 5% from Russia.

He expects demand for villas to remain high, among buyers as well as people looking to rent units, because the country is a sought-after location and there is limited self-catering residential stock available. 

Importantly, says Smith, the government has signalled its commitment to maintaining tight control on urban development in order to preserve the environment – the country’s greatest asset.

The Seychelles, Africa’s smallest nation with only 90 000 citizens, is a popular getaway destination for honeymooning couples from Africa and Europe. With protected coral reefs and pristine waters, it attracts scuba divers and holiday-makers who like spending time on the beach and in the waves in an upmarket environment.

The Eden Island resort is on reclaimed land in a basin with a private mooring set in front of the property. All villas offer spectacular mountain and ocean views. About 430 units have been built and are occupied, with construction on the exclusive development scheduled for completion in 2016.

Protecting investors from capital loss is a clause in the sales agreement that gives the developer a say over the prices at which units are sold as well as a pre-emptive right to buy. 

“If someone is in difficulty, we would rather find a way of ensuring price stability is maintained than have a property sold at a discount and then debase the development’s market value,” says Smith. He points out that new units are never discounted.

“Many early buyers are upgrading to a larger unit or buying a second, third or even more property in the development,” he points out.

Smith says the development contributes about 40% of foreign direct investment to the Republic of Seychelles and just under 5% of its Gross Domestic Product. It has created 700 permanent jobs and expects to employ at least another 700 people.

Although Eden Island has added to the number of rooms available for tourists, there remains a limited supply of holiday rental stock. Demand from holidaymakers is expected to remain strong, giving investors good reason to expect capital values to keep on their steady upward growth trajectory.

“Tourism is the major driver of the economy in the Seychelles. This resort is seen as an important magnet for visitors. We continue to support the Seychelles Investment Board and Seychelles Tourism Board in keeping the country top of mind in the global context,” adds Smith.

 

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