Real Estate Investor Magazine South Africa September 2015 | Page 64

AFRICA

Product Diversification

and Returns in a Rand Hedging Currency
Why UK property is currently the overseas asset
of choice for South African investors
BY GILES BESWICK

S

ince the turn of the year at Select Property Group
there has been a significant spike in the number
of investors from South Africa looking to secure
a real estate asset in the UK.
Britain is the largest booking centre for overseas
investment among South Africans, so it has long been
a popular destination for offshore assets.
But as the rand hits record high exchange rates
against the pound, the interest over recent months has
been unmistakably more pronounced.
Strong levels of capital growth and the highest rental
rates in Europe
Thanks to a booming economy and record low level
housing stocks, property prices continue to rise in the
UK. Figures published recently show that average
prices increased by 9.6% in the year to June 2015.
In the residential rental market, changing
generational attitudes towards home ownership, which
has seen a 27% rise in Britons preferring to rent their
property in recent years, is having a profound effect.
Britain’s rental rates are 86% higher than the European
average, as supply struggles to keep apace with the
sustained demand for rental property.
As a result, UK buy-to-let investors have enjoyed
total returns of 1,400% since 1996, with the average
£1,000 invested in the final quarter 19 years ago worth
£14,987 by the end of 2014.
Student property is currently the UK’s number oneperforming asset
The student property sector, a resilient, cost-effective,
high-performing and fully managed investment, is

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SEPTEMBER 2015 SA Real Estate Investor

pushing all the buttons for the off-shore investor
community right now. £4.2 billion has been invested
in the sector in the first six months of 2015 alone
according to Knight Frank.
There is an undersupply of the purpose-built student
accommodation (PBSA) that today’s students want
in all the UK’s leading university cities. Consequently,
they are prepared to pay a premium to access this type
of accommodation, driving rent growth across the
market.
Student property was the only UK asset that grew
investor returns in every year throughout the global
economic downturn, and this proven track record is
just one of the reasons why demand among investors
to add it to their portfolio is currently so frenzied.
A shift away from London
As the market in London begins to hit an affordability
ceiling, there has been a definite shift in recent times
in the buying patterns of many overseas investors, with
other cities across the country rapidly gaining attention.
Property price growth has been felt the most outside of
London. Five of the nine regions outside of the capital
registering an uplift in values in May this year, while
Savills currently identifies the historic city of e