Property experts look to the secure UK market, where property is effectively 25% cheaper than two years ago
The rand’s positive reaction to the appointment of Cyril Ramaphosa as ANC leader means that South Africans are in the best position in years to diversify their investments with an overseas property portfolio.
Lisa Bathurst, Director of Hurst and Wills, independent overseas property investment professionals, says the UK property market is ripe for SA investment. “Choosing reputable developers and agents is imperative when investing offshore. What makes our business unique is that we are not affiliated to any one developer. We work with several developers and sellers and can therefore exercise independence. Our aim is to match clients to the best property for them, aligned to their personal objectives and wealth strategy. We only work with developers who have a proven track record of more than 15 years and we personally vet the developments,” she said.
Specialising in Europe, the UK market is currently Hurst and Wills’ top pick. “Northern UK cities like Manchester and Liverpool are probably the best place to invest at the moment. Carefully chosen student developments in the UK are also offering great returns,” says Bathurst. “The Pound is devalued but is likely to strengthen as Brexit and trade negotiations become clearer. This, coupled with a stronger rand, makes properties effectively 25% cheaper than two years ago for South Africans,” she says. “The UK has a worldwide reputation for reliability and profitability and so Britain’s property market continually draws international investors and returns in GBP – a currency long established as a rand hedge.”
Andrew Rissik, Managing Director of Sable International, agrees: “Thanks to Ramaphosa’s appointment, we are seeing rand exchange rates last seen in 2015.” Coupled with that, says Rissik, the UK pound has strengthened substantially against the EUR & USD making up most of its post-Brexit losses. “From a SA point of view, this bodes very well for the UK investment arena as the current rand strength offsets the negative effect of pound strength for South African investors.”
However, the strong rand does not mean we’re out of the woods, as South Africa still faces an uncertain future with much resting on Ramaphosa’s next steps. Rissik strongly advises keeping rand-holdings balanced with an offshore exposure. “The rand is now at a fair value considering the real economic and political challenges that lie ahead,” he says. “There will be at least a two-year lag before we start seeing real gains attributable to Ramaphosa being at the helm, and that’s only if he starts fixing the economy now. By that I mean prosecuting corrupt politicians and employees who have defrauded SA’s SOEs. As well as creating an environment that is investor friendly, that leads to aggressive job creation and broadening of the tax base. So, while we are euphoric about the glimmer of hope, this is a good time to make use of a strong rand and diversify offshore.”
Rissik says that it’s likely the Rand as an emerging currency will continue to come under increasing pressure as interest rates in developed economies start rising, making overseas investments more attractive over time. “South Africans should make sure that their rand-holdings are balanced with hard currency exposure to protect their wealth. An offshore investment strategy is essential,” he says.
According to Bathurst, many South Africans hold listed products offshore, keeping up to 60% of their wealth there. “Outside of the UK, France offers some affordable options and Portugal with its new tax regime, thriving property market and Golden Visa programme is a great option for South Africans.
“The investment trend is for small units with clever spatial design, situated in prime central areas. Look for buildings that are end-user orientated, these often have everything under one roof like gyms, media rooms, and communal roof terraces for entertaining. Sustainable property is the future, so keeping that under consideration will keep savvy investors a step ahead,” she says.
“It makes sense to place money in strong currency where stability, security and strong returns are possible and to hedge against the lack of this here in South Africa,” says Bathurst. “Investing in property offshore has a double benefit, as you can benefit from global growth and earn an income in hard currency. Offshore property also offers on-going income throughout via rental yields that have outperformed many dividends of alternative forms of investments,” she says.
Watch the property media for Hurst and Wills countrywide events showcasing their preferred investment options. “Later this year, we will introduce new markets within the UK and further afield. We are also developing the acquisitions side of the business, so that we can scope out specific commercial and industrial opportunities for our investors.”