Increased uncertainty in the European Union this year will have a positive effect on the UK, making it a more attractive property investment destination than its European counterparts, according to global property investment firm IP Global’s Director of Africa, George Radford.
“The future for the single market is very uncertain,” Radford says. “This continued uncertainty will have a favourable effect on the UK which has attracted over £15 billion in foreign investment since it voted to leave the EU.”
“Should any of its European counterparts make a similar decision, they will have to unravel their currency from the euro,” Radford cites. “The UK, which retained its sovereign currency, is in a stronger position on exit.”
A recent World Bank report ranks the UK as the seventh best country in terms of the ease of doing business, while Germany is ranked 17th and France 29th.
In terms of registering a property the UK also ranks significantly higher (47th) than Germany (79th) and France (100th).
“Italy is in crisis and in France far rightist Marine Le Pen could be voted in, leaving the future for a single market very unclear,” shares Radford.
Other favourable conditions for investment are that the UK property market is structurally undersupplied, and the rand has strengthened against sterling over recent months.
“So despite Brexit, London will remain a global financial hub for the foreseeable future,” says Radford.
The UK is also expected to show relative stability amid global volatility. “There are so many unknowns – Donald Trump’s presidency, the crisis in Syria, oil prices still being low albeit being pushed up, the Chinese economy still very uncertain, and the potential locking of horns between China and the US as well as the US and Russia.
“Other factors influencing volatility include interest rates potentially rising in Tier 1 economies, stock markets continuing to reach all-time highs and the Japanese economy coming out of stagnation and showing positive growth.
Radford says amid this backdrop of uncertainty, property historically comes to the fore as a comparatively lower risk holding. When planning your investment asset allocation, Radford recommends focusing on ensuring it is multifaceted, diversified and future-oriented for succession planning, wealth creation, asset protection and currency diversification.
All the variables and uncertainty should be balanced against a property asset which is robust stable, fixed and tangible. And our clients are typically seeing a 10% to 15% ROE (return on equity) per annum.
“It’s an opportune time for property investment in the UK from a currency perspective coupled with UK interest rates remaining low,” he says. “This time last year, the rand was at R23 to the pound, and now it is at R17, strengthening to over 25% against the sterling and against the dollar too.”
Supply of new housing in the UK continues to fall considerably short of rising demand – with England alone experiencing a 40-53% shortfall of new units each year, according to government estimates. Radford recommends investors to look at pockets of value where employment growth and incoming investment in infrastructure or transport is driving a population increase and demand for housing.
Areas of the UK that IP Global is focusing on in 2017 include Outer London and Northern Powerhouse cities Liverpool and Manchester, as well as Birmingham.