Cape Verde: Overview

RENTAL YIELDS

Property is selling like hot cakes in Cape Verde

About half of the 482,000 population live in the biggest island, Santiago, which is home to the capital city, Praia. However, tourism is largely concentrated in the island of Sal, which has the country’s only international airport capable of receiving charter flights from Europe. New and bigger international airports are scheduled to be opened in Santiago, San Vicente, and Boa Vista.

New developments are rising in almost every major island in anticipation of the boom. Capital values are rising by 10% to 15% annually. Yet property in Cape Verde is still a bargain at around €1,200 to €1,650 per sq. m.

Because the 'opening to tourism' is new, it makes little sense to talk of yields. But local realtors say that a studio unit in Santa Maria, Sal, worth €81,000, can bring in a 8% to 9% yield.

TAXES AND COSTS

Cape Verde rental income tax is moderate

Rental Income: Rental income gained in the Islands is taxed at 20%. Property tax is levied annually on the value of immovable property at 0.075%.

Capital Gains: Capital gains tax is levied at a flat rate of 3%.

Inheritance: Any property transmitted by inheritance or by gift is taxed at a flat rate of 3% on the attributed value.

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BUYING GUIDE

Total transaction costs are high in Cape Verde

The total roundtrip transactions cost, i.e., the cost of buying and selling a property, is around 18%, inclusive of the realtor's 5% commission. A lawyer is needed, and will cost 3% of the purchase price. Other costs include Sales Tax (3%), Conveyance Tax (3%), Registration Fee (2%) and Title Deed (2%). The buyer pays for all costs, except the realtor’s commission.

Property buyers are advised to open two accounts, one in Escudo and the other in Euro. Escudo cannot be transferred out of the country but Euro can.

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LANDLORD AND TENANT

Cape Verde’s residential tenancy law is strongly pro tenant

Rents: The landlord and tenant are free to agree on the rent, and the due date of payment.

Tenant Eviction: The lease is automatically renewed at the end of the term, and the landlord may only terminate in very limited cases. He needs to file an eviction request in court, involving substantial delays.

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ECONOMIC GROWTH

Verde is the colour of hope and development

Formerly a Portuguese colony, Cape Verde (pop. 507,000, GDP/cap US$2,679) became independent in 1975. It now has a stable democratic system, though initially after independence a one-party state was established by the African Party for the Independence of Cape Verde (PAICV), under the leadership of Aristides Pereira, who ruled until 1990.

Growing pressure led to multi-party elections. Antonio Mascarenhas Monteiro of the Movement for Democracy (MpD) succeeded Pereira, serving two five-year terms. In 2001, Pedro de Verona Rodrigues Pires was elected president, returning power to the PAICV. He was reelected in 2006.

The economy has grown strongly from a low base. From 1980 to 2005, real GDP per capita grew by 128%, and 7% annually from 1995 to 2005. GDP growth is expected to be 7.7% in 2006. Inflation is 0.7%, closely linked to the eurozone’s inflation.

The number of people below the poverty line was 36% in 2002, of whom 21% are unemployed. Cape Verde has limited natural resources, and can only support limited agriculture or pasture.