Think a rand-hedge, think the pound. Think a rand-hedging asset, think British property. And think about the best city to find all of this, think London, right?
For years London has been the go-to UK destination. The country’s financial capital, Luxury homes in exclusive postcodes. But above all else, rate of returns that became legendary among the global investor community. But things have changed.
A rate of appreciation that is now slowing
London’s growth cycle is ending. Figures published in April show that some properties in the prime central London sector have seen asking prices slashed by as much as 40% since coming onto the market.
London was also recently downgraded in PricewaterhouseCooper’s Urban Land Institute’s Emerging Trends in Real Estate index from a top 10 city to 15th, lower than even the volatile Turkish capital of Istanbul.
Furthermore, with the high average cost of a London property exceeding the limit South Africans are permitted to move out of the country in a single year, the British capital is quickly losing its investment allure.
Now there’s another UK city on the lips of international investors.
Manchester in England’s north-west is currently home to the UK’s highest yields. Investors here can achieve average yields as high as 8% according to HSBC.
Savills names it as the UK’s best regional city for investment, while CBRE recently reported that Manchester has received £8.2 billion worth of commercial property investment over the last decade, more than any other city away from London. But it’s the residential property market that’s driving investor sentiment.
The fastest growing Generation Y city
Britain is fast moving away from being a nation of homeowners to a nation of renters. It’s Generation Y, the Millennial worker, that’s driving this change:
- Half of Britain’s 25 to 34-year-olds were renting privately in 2013/14 instead, twice as many as in the previous decade.
- 60% of 20 to 39-year-olds will be renting by 2025.
- 22% of the city’s population is made up by Generation Y, more than four times the national average.
- A further 2.85 million of this demographic will move to the city by 2025.
However Manchester has one of the lowest levels of housing stock in the country. The demand to supply imbalance of rental property currently stands at 2:1. This means that real estate in the city can command strong rental premiums – and more international investors are beginning to identify this.
A city with investment longevity
Manchester is also on the brink of years of sustained economic growth.
The key city at the heart of the UK’s Northern Powerhouse. As a result of huge levels of government-backed investment and interest from overseas businesses, Manchester will witness thousands of new jobs created, millions more people visiting the city from around the world and investment deals worth billions. It will mean more young workers and more demand for property.
In July Select Property Group will host the 2016 Property Investment Masterclass to investors across the country. Follow the links below to find out more and register your attendance for your preferred city:
Cape Town (Wednesday, 20th July)
Durban (Saturday, 23 July)
Johanesburg (Tuesday. 26th July)