Stronger rand has again made offshore property investment an attractive investment
The positive reaction of South African currency, rand, to political changes over the past three months has some good news for South African property investors. This has placed investors from the southern African nation in the best position in several years to invest in overseas properties. Strong rand has again made investment in foreign property a lucrative option for South African property investors. They can now expect good returns by investing in property either directly or through listed property investments.
The chief executive of Hurst and Wills, independent overseas property investment professionals, Lisa Bathurst said that the property market in the United Kingdom is ripe for South African investment.
Bathurst said that the UK market is Hurst and Wills’ top pick and added that northern UK cities such as Manchester and Liverpool are probably the best places to invest at the moment. Carefully chosen student developments in the UK are also offering great returns.
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 said.
She added that the UK has a worldwide reputation for reliability and profitability, and so Britain’s property market continually draws international investors and returns in British pounds, a currency long established as a rand hedge.
Andrew Rissik, the managing director of Sable International, agreed and said that coupled with that, the pound has strengthened substantially against the euro and the dollar, making up most of its post-Brexit losses. From a South African 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. He added that the rand is now at a fair value considering the real economic and political challenges that lie ahead.
The chairperson of Sovereign Trust, Tim Mertens said UK property has been seen as a stable asset class coupled with a strong base currency and with good potential for growth given the demands of urbanisation across the UK. A buyer classed as being non-UK-domiciled would typically acquire residential property through a corporate entity registered in an offshore financial services centre.
Rissik said investing in property offshore offers double advantage as one can benefit from global growth and earn an “income via rental yields that have outperformed dividends of many alternative forms of investments”.