South Africa Property Trends for 2020
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As we look towards 2020, now is the ideal time to review the state of property markets around the world as we end 2019. The past year has been incredibly eventful for many countries, as external factors continue to impact property markets.
The UK property market, for example, continues to suffer from chronic undersupply, creating a highly-competitive sector with plenty of potential. As unprecedented levels of foreign investment flood into regional cores, prices in these key areas are rising against the traditionally popular London market.
In South Africa, on the other hand, a struggling local economy has created an underperforming investment market. Described as ‘intense economic stress’, 2019 has largely proved to be the year where South African investors look overseas for their next opportunity. Although we’re seeing ‘green shoots’ of activity that indicate something more in the new year, it’s far from the consistent, sustained productivity that the UK can offer.
As part of our wider 2020 trends forecasting, we’re examining the outlook for the UK and South African markets as we head into the new year, as well as some of the global property trends that will shape real estate in 2020.
South African Property Trends
The South Africa (SA) market has, much like the UK market, been impacted by external factors throughout 2019. According to Dr Andrew Golding, CEO of Pam Golding Property Group, while ‘local economic activity gradually strengthened’ throughout the year, the first half of 2019 was largely governed by the uncertainty that came with the General Election.
At the same time, activity in the SA housing market delivered another ‘modest performance’ this year. Dr Golding highlighted how this had led to many savvy investors taking opportunities in the current market to make astute ‘investment choices’ – one of these being identifying alternative overseas markets.
It also emerged during 2019 that many SA investors do not have the necessary funds to ensure a comfortable retirement. In a survey by Just SA, a specialist retirement income company, they found that the average South African has just R1.8 million in savings, with the expectation of receiving R12,000 a month in income. In reality, their capital is 22% short of the amount they’d actually need to achieve their financial goals at 2019 annuity rates. Again, this highlights why many SA investors are looking to property investment in the UK as a way of supplementing lower value pensions.
Unfortunately, heading into 2020, South Africa’s domestic market continues to struggle. According to Statistics South Africa, in Q1 2019 the SA economy contracted by 3.2% – the biggest quarterly fall since Q1 2009. This drop looks set to continue into the new year alongside a rising unemployment rate, which hit 27% in 2019. Heading into 2020, South Africa is still rated under the ‘non-investment’ grade by both Standards & Poor as well as Fitch.
Finding Brexit Opportunities
With 2020 on the horizon, it’s expected that a large majority of South African investors will continue to look overseas, despite some improvements to the local economy and investment market.
When looking at South African investment in the UK specifically, prior to the 2016 Brexit vote, 86% of RSA investors cited investments in the UK, a figure which has only dropped to 82% since the referendum. Despite the political uncertainty that follows an event such as Brexit, responses to the SevenCapital Brexit Survey have shown that amongst South African investors, nearly seven in ten cited Brexit as the catalyst for investing in the UK market.
Economically, the UK represents a much more preferable market to South Africa for several reasons. The UK property market has seen annual growth of 5.7% and a weakened Sterling means international investors can stretch the value of their currency further – especially in affordable regional markets that are predicting incredible growth in the new year.
Investing from South Africa Conclusion
Since 2016, a broad range of UK regions have seen unprecedented growth. While key cities such as Birmingham are set to continue growing, the South East is also seeing incredible growth as prices firm up in key markets amongst the London Commuter Belt such as Slough, Bracknell and Basingstoke.
For South African investors that are only just starting to see their investment market showing signs of recovery, now is the perfect time to invest in an alternative market that can deliver consistent returns quickly – particularly important if a major investment objective is to supplement a pension or build security for the future.
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