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Courtesy of punitive exchange rates there are not many of us who can now afford to buy property in the UK, South Africans having lost half their wealth in the last six years as a result of currency decline.
London especially is mostly out of reach for the majority of South Africans.
“Everyone is interested in London. We get five or six calls a week, completely unsolicited and especially for the ‘biltong belt’ areas like Wandsworth, Putney and Richmond. But prices here are upward of £600?000 (R13.1m) for a one-bedroom unit and for South Africans it is just a bridge too far,” says Chris Immelman, MD of Pam Golding Properties International and Projects Division.
Less prohibitively priced opportunities in the residential sector occasionally show up on the radar, but finding affordable investment opportunities for South Africans increasingly requires exploring alternative options.
It’s an option that may not be front of mind, but investors determined to pursue the UK property market can sink their teeth into dental property from £125 000 (R2.7m) that guarantees the investor an income stream for 20 years, Immelman tells finweek.
In the last few years, the dental sector in the UK, valued at R5.8bn, has shifted from an informal ‘cottage industry’ to an efficiency-driven market sector that attracts investment interest from both corporate and private investors.
The UK corporate dental market has grown dramatically between 2010 and 2014, and was estimated to be worth around £1.3bn (R28.3bn) in 2013/14, according to a report by LaingBuisson.
“Up to a few years ago the dental business was very regulated with limitations on the number of dental practices owned,” says Immelman.
“The abolition of that regulation saw the emergence of large corporate groups buying dental practices, the two largest being Integrated Dental Holdings (IDH) and Oasis.”
The corporate dental operators – dental practices being their primary business – are not particularly interested in owning the properties or becoming landlords.
But having acquired the dental practice often requires acquiring the property, which they then rent out to the dental practice.
And this is when these properties, dotted around UK villages, with their AAA grade corporate tenants who have signed long leases, become available for purchase.
An attractive investment opportunity
Partnering with SIRE Properties, a UK-based investment company that specialises in finding and managing niche property opportunities, Pam Golding Properties says the offering of affordable lot sizes of dental property represents secure, predictable long-term income as well as capital growth prospects.
As a landlord to corporate dental tenants, a large proportion of income is guaranteed from the government through the National Health Service (NHS).
And dentists represent one of the lowest default risks, thus offering a low-risk tenant profile and very low vacancy risk.
“With a 20-year signed lease in place and the business rights of the practice sitting with the building, not the dentist, you can gear 50% without even being asked for financials,” explains Immelman.
Typically in the £200 000 to £450?000 (R4.4m to R9.8m) price range, dental properties are normally former residential units, affording investors a safety net via alternative use value and exit flexibility with a potential buy-and-sell-back option through SIRE Properties.
This is an excerpt from an article that originally appeared in the 26 November 2015 edition of finweek. Buy and download the magazine here.
