South African Investors Turn to UK Properties
For South African (RSA) investors, an underperforming local investment market has meant an influx of residents looking abroad for property investment opportunities. In the UK, Buy-to-Let is a huge market worth over £1 trillion and represents the chance for South African investors to invest in a sector with stability, rising demand and huge potential. While the UK remains popular internationally, certain aspects of the market mean we’re seeing more South African investors turn to UK properties.
With the rise of city-centre living, the decline of home buying and much more tenant-sided legislation, Generation Rent continues to be a rising demographic within the UK property market and regional cores have stepped into the spotlight, delivering much more consistent returns when compared to the traditionally popular London.
The Brexit Catalyst?
The SevenCapital Brexit Survey, a global survey of high-net-worth individuals (HNWI) found that early four in five (85%) of those who invest in property are currently investing in the UK, despite the perceived ‘uncertainty’ that comes with Brexit. Furthermore, 3 out of 5 of these individuals currently invest in property – an investment asset commonly chosen for its stability and potential.
It’s this stability that makes property – and UK property investment in particular – such an attractive prospect in uncertain market conditions. Brexit is undoubtedly one of the most important political events to happen in our lifetime, hotly debated by both sides and with far-reaching consequences on many different aspects of the UK. However, for property investors at least, it isn’t the major concern that headlines would suggest.
Supply and demand of property is a much more pressing issue. There is a shortage of residential property to meet the young, growing demand, a problem if you’re looking to buy a home but favourable if you own or you’re looking to own an investment property.
If you own property in an established area experiencing regeneration or an emerging market, you’re going to be seeing incredible demand. These markets are making improvements to their infrastructure, transport, commercial and business growth, meaning more opportunity and more people seeking to take advantage of that opportunity.
Misery for South African Economy
When looking at South African investment in the UK specifically, prior to the 2016 vote, 86% of RSA investors cited investments in the UK, a figure which has only dropped to 82% since the referendum. Despite the perceived uncertainty that comes with Brexit, respondents to the SevenCapital Brexit Survey showed 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. In the Bloomberg ‘Misery Index’, South Africa is rated as the third-worst economy behind Venezuela and Argentina – driven by ‘intense economic stress’ and unemployment. This comes at a time when 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.
Bram Davies, managing partner at Sigma Property Hunt, believes: “It is important that South African buyers understand the immense opportunity investing in UK property presents – world-class infrastructure, with an array of architectural and modern technologically advanced choices”.
As you’d imagine, South African investors would heavily benefit from diversifying their portfolio and UK property remains an ideal investment to achieve that.
South African Investors Choose UK Investment Hotspots
Multiple investment ‘hotspots’ have already begun to appear, taking the focus away from the traditionally popular London market. Popular cities such as Birmingham and Oxford continue to lead the way, while emerging markets in the South such as Slough, Bracknell and Reading start to realise their full potential.
Birmingham is a key example of how a regional core is building ‘generational developments’ and delivering a new standard of residential and commercial space, using incredible demand, growth and opportunity to surpass the average 6% yield that was once only found in the capital. As the fastest growing UK city in the last decade with a population increase of 100,000 and a further 171,000 forecasted by 2039, Birmingham is delivering an exciting development pipeline in a much more affordable market when compared to the capital.
It’s not just Birmingham that is changing the UK landscape. Affordability is also a huge factor in the ‘London exodus’, as more renters move away from the capital to these commuter towns such as Slough and Reading.
With an economy worth around £9 billion, the highest concentration of corporate headquarters outside of London and a broad range of global business, Slough is building on its foundations as a thriving commercial landscape and expanding the accessibility it can provide across the South East.
Thanks to projects such as Crossrail building unprecedented access between commuter towns and the capital, these towns are building ideal places to live, work and play all within arms reach of London. This level of demand is most obvious when we look at prices – in the last 20 years, property in the ‘traditional commuter belt’ has increased in value by 313%.
There’s no doubt that now is the time to look at the UK market. Despite the uncertainty of Brexit, property prices continue to rise, the national GDP has grown and less obvious regional towns and cities are making a breakthrough, providing a prime opportunity for South African investors to turn to UK properties for more lucrative opportunities. Property also remains a long-game, offering the best returns over time. With the general consensus agreeing that markets will stabilise after Brexit, the UK suits this long-term strategy perfectly.