Real Estate Investor Magazine South Africa June 2016 | Page 54

UK INVESTMENT

Manchester on the Rise
Why more South Africans are moving their money into UK real estate
BY GILES BESWICK

H

igh returns. Huge product diversity.
Returns in a long-established rand hedge.
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 for 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
52

JUNE 2016 SA Real Estate Investor

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.

RESOURCES

Select Property Group
www.reimag.co.za