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UK property is offering thousands of South African investors investment solace while domestic economic and political volatility threatens the strength of their portfolios. At Select Property Group we’ve witnessed a 200% rise in the number of South Africans wanting British bricks and mortar since 2014.
The UK capital’s property market is as legendary as its famous landmarks. For decades, investors from across the world have enjoyed huge returns from assets in some of the country’s most exclusive addresses. But London is no longer the number one British property location it once was.
It’s becoming increasingly expensive
At a time when the rand continues to lose value in international terms, London is fast becoming unaffordable for many South Africans.
From April 1st new stamp duty levies on additional property purchases, which will also be applied to purchases made by overseas buyers, means that the average London property will also require R719,763.19 in stamp duty, almost 96% more than you would have needed earlier this year.
Given that the individual capital allowance set by the South African Reserve Bank will only allow you to move R10 million out of the country each year, London is fast reaching an affordability ceiling for many investors.
Knight Frank research shows that annual yield growth in the prime central London sector fell to just 0.7% December, its lowest level for 18 months. Average yields in London’s highest performing borough, Newham, last year stood at 6% according to HSBC figures. In comparison yields in Manchester, the UK’s number one city for property investment yields, currently average 8%.
In April analysis provider Propcision found that asking prices in London’s most desirable areas have been slashed by as much as 40% since coming to the market. Indeed property values in the first quarter of 2016 dropped by 0.3%, while all other regions in England experienced growth of at least 1.4% over the same period.
Other cities now boast the future growth prospects London once did Chief among which is Manchester in England’s north-west
Home to the country’s highest yields, it also has the UK’s highest rental demand, thanks to an 85% increase in the number of households now living in the private rented sector (PRS) in Manchester. But while demand rises, supply wanes, with just 8,072 PRS units in the pipeline over the next four years at a time when there’s a demand of 8,600 every year.
Crucially, however, it’s the prospect of higher returns and more growth to come that’s now shifted the investor spotlight away from London and on to Manchester. Online estate agency HouseSimple recently named it as the property investment hotspot for the next decade, with the city also at the heart of the UK government’s £56 billion ‘Northern Powerhouse’ which will see the creation of an economy in the north of England to rival that of London.