Covid-19, why is the real estate market still keeping its safe haven status ?

23 April 2020

Construction industry disruption, real estate transactions freezing, closure of notarial studies, financial institutions’ activities slowing down, the impacts of Covid-19 are raising questions and concerns in future buyers.

This confinement period has enabled many to think and become increasingly aware of their housing situation. A property with a balcony and/or a garden and a dedicated study has never ever been so dreamed of. Housing remains a basic necessity but the desire for comfortable housing is being felt more prominently.

With its numerous advantages, real estate investment has always been and continues, even more today, to be considered a solid asset. Indeed, experts believe that the actual crisis impacts both demand and supply, and once the confinement period is over the sector will resume. Why does property investment remain an attractive safe haven?

Tangible value

Real estate has a high tangible asset value, unlike other investment securities. It also retains perennial value: both in the case of leasing or an acquisition. Once the confinement period is over, relocation will continue to take place (for work, for a lifestyle change, for expatriation) and there will still be concerns for housing seniors and people with disabilities.

Long term benefits

Real estate investment has unique advantages, rarely seen in other types of investment such as life insurance. For example, a first-time buyer does not have to pay “Land transfer tax” for property acquisition whose price does not exceed Rs 6 million. Moreover, upon the acquisition of property whose price exceeds $ 500,000, a foreigner can enjoy several fiscal benefits in Mauritius. Real estate can also offer excellent rental returns in the long run, for example on residential projects in Cap Tamarin where a 6.5% average rental yield has been recorded. In addition, real estate investment enjoys capital appreciation, especially if the property is located in a booming region which is sought-after. These past years, an average of 15% annual capital gain has been made on the apartments at the heart of Cap Tamarin.

Less fluctuations

A real estate investment is less influenced by fluctuations associated with economic conditions, as it is the case for the stock market. This enables to devise long term investment strategies.

Increase in demand

It is to be noted that remaining at home was a far more comfortable experience if one had a balcony and/or garden, and the confinement was better lived by those residing in rural than urban areas. It is believed that the end of this sanitary crisis will see a rise in a new type of demand and a new clientèle. The confinement has been a revelation to potential buyers who now aspire to own well designed apartments, close to nature and with all the daily services and amenities nearby.

Protect your wealth

Investing in property is a good strategy to create wealth over the long run and many appreciate the idea of leaving their heirs with such assets.

However certain precautions need to be taken when acquiring an off-plan property, to safeguard the investment. In the case of a purchase on plan also known as VEFA (Vente en l’Etat Futur d’Achèvement (VEFA), the future buyers need to ensure that the project benefits from a performance bond (GFA, garantie financière d’achèvement). Under French and Mauritian law, it is a legal guarantee of completion of the project according to the original conditions by financial institutions, in the event that the promoter fails to its obligation.

With the prevailing situation, for those who decide to embark on a property investment journey, it is highly recommended to invest strategically. Our Sales Team is working remotely and remains available by email and phone to give you the best advice on your project, do not hesitate to contact us.