Publications
Partners
WHILE BLEAK CAPITAL and income growth prospects may well be prompting investors to exit South Africa’s buy-to-let market, owning a rental flat in London appears to be regaining its lustre. Real estate agents have in recent weeks reported an uptick in London residential sales to South African investors looking to take advantage of the strong rand and property prices in Britain that are generally still below their 2007 peaks. The fact that London is hosting the 2012 Olympics is no doubt adding to London’s desirability as an investment destination for South Africans looking to diversify their property interests offshore.
Chris Immelman, MD of Pam Golding Properties’ International Division, says recently announced exchange control reforms – allowing individuals to invest R4m/year offshore – also makes it more attractive for wealthy investors to enter prime London suburbs.
Immelman notes the London buy-to-let market currently offers rental yields in sterling of close to 6%, which is attractive in the current global climate of low single digit and near zero interest rates. Even though the interest rate in SA is still relatively high, most buy-to-let investors in SA have to be satisfied with an income stream of a lowly 4% (Rode & Associates’ figures).
Immelman says London’s south-west suburbs – the so-called golden triangle – currently offer the best buying opportunities from a value viewpoint. Those include areas such as Putney, Roehampton, Wimbledon and Richmond Park, where buyers can expect to pay (roughly) between £250 000 (R2,8m) and £350 000 (R3,9m) for new one- and two-bedroom flats.
Immelman says these suburbs aren’t as pricey as their posher central London counterparts, such as Chelsea and Knightsbridge, but still offer easy access to the city. South-west London is also popular among people looking for more of a suburban lifestyle with plenty of open green spaces.
Although bank lending remains tight in Britain, South African buyers can still qualify for mortgages with loan-to-values of 50% to 60% at interest rates of between 3,25% and 4%. Immelman advises prospective investors to put down a 50% deposit. “This would mean your investment will be cash-flow positive from day one.”
Scott Picken, CEO of International Property Solutions, a company investing in residential bricks and mortar on behalf of high net worth South African clients, says investors now have a one-off opportunity to take advantage of the strong rand, high yields and low asset values to gain a foothold in the world’s prime financial hub.
Picken recently partnered with London-based residential investment and management company London Central Portfolio to create a residential value fund of sorts named the Central London Recovery Fund, which offers South African investors the chance to share in London’s housing recovery without having to fork out millions in the process. The minimum investment is £50 000 (around R560 000).
The fund’s investment mandate is to buy 20 one- and two-bedroom flats in prime central London suburbs with a targeted asset value of £33m (R370m). Investors can expect to earn a total return of 15%/year (9% capital growth, plus a 6% rental yield). After five years the properties will either be sold and capital gains returned to investors or the lifespan of the fund extended.
Picken says although London house prices are generally still below their 2007 peaks, the rebound is likely to happen quickly. He notes astute investors are therefore now getting into the London residential property market before the recovery gains momentum.
Latest figures from British property group Knight Frank show central London house prices are already up 12% in the year to end-October. Liam Bailey, head of residential research at Knight Frank, says price growth has been strongest in areas where overseas demand is high, most notably Kensington and Chelsea.
Bailey says while European demand for buy-to-let investments in London has been subdued over recent months – Eurozone buyer registrations were down 34% in October year-on-year – interest from Asia, Russia, the Middle East, Canada and Brazil is on the rise. Bailey says the outlook for central London remains relatively positive compared with the rest of the British market, primarily on the back of rising demand from offshore investors. Continued demand from international buyers is underscored by the fact that in the 12 months to June, 50% of all new build apartments in central London were bought by foreigners.
Bailey says city bonus money earned by London professionals will provide further support to central London’s housing market over the next few months. “While bonuses are expected to be more varied this year than in 2009, there’s very early evidence of bonus buyers coming into the market to look at available stock. Our expectation is that bonus buyers won’t rush into the market in December but we’ll see a more delayed process, with the market strengthening in January and February as those buyers wait to gauge the short-term direction of the market.’’
But Bailey warns the post-crash bounce in London house prices is set to slow over the next 12 months on the back of austerity measures introduced by Britain’s new government earlier this year, such as tax hikes and social spending cuts. Another key factor that could put a brake on property’s recovery is rising interest rates. Bailey expects rates to begin to climb early next year from their current historic lows.
Chris Immelman, MD of Pam Golding Properties’ International Division, says recently announced exchange control reforms – allowing individuals to invest R4m/year offshore – also makes it more attractive for wealthy investors to enter prime London suburbs.
Immelman notes the London buy-to-let market currently offers rental yields in sterling of close to 6%, which is attractive in the current global climate of low single digit and near zero interest rates. Even though the interest rate in SA is still relatively high, most buy-to-let investors in SA have to be satisfied with an income stream of a lowly 4% (Rode & Associates’ figures).
Immelman says London’s south-west suburbs – the so-called golden triangle – currently offer the best buying opportunities from a value viewpoint. Those include areas such as Putney, Roehampton, Wimbledon and Richmond Park, where buyers can expect to pay (roughly) between £250 000 (R2,8m) and £350 000 (R3,9m) for new one- and two-bedroom flats.
Immelman says these suburbs aren’t as pricey as their posher central London counterparts, such as Chelsea and Knightsbridge, but still offer easy access to the city. South-west London is also popular among people looking for more of a suburban lifestyle with plenty of open green spaces.
Although bank lending remains tight in Britain, South African buyers can still qualify for mortgages with loan-to-values of 50% to 60% at interest rates of between 3,25% and 4%. Immelman advises prospective investors to put down a 50% deposit. “This would mean your investment will be cash-flow positive from day one.”
Scott Picken, CEO of International Property Solutions, a company investing in residential bricks and mortar on behalf of high net worth South African clients, says investors now have a one-off opportunity to take advantage of the strong rand, high yields and low asset values to gain a foothold in the world’s prime financial hub.
Picken recently partnered with London-based residential investment and management company London Central Portfolio to create a residential value fund of sorts named the Central London Recovery Fund, which offers South African investors the chance to share in London’s housing recovery without having to fork out millions in the process. The minimum investment is £50 000 (around R560 000).
The fund’s investment mandate is to buy 20 one- and two-bedroom flats in prime central London suburbs with a targeted asset value of £33m (R370m). Investors can expect to earn a total return of 15%/year (9% capital growth, plus a 6% rental yield). After five years the properties will either be sold and capital gains returned to investors or the lifespan of the fund extended.
Picken says although London house prices are generally still below their 2007 peaks, the rebound is likely to happen quickly. He notes astute investors are therefore now getting into the London residential property market before the recovery gains momentum.
Latest figures from British property group Knight Frank show central London house prices are already up 12% in the year to end-October. Liam Bailey, head of residential research at Knight Frank, says price growth has been strongest in areas where overseas demand is high, most notably Kensington and Chelsea.
Bailey says while European demand for buy-to-let investments in London has been subdued over recent months – Eurozone buyer registrations were down 34% in October year-on-year – interest from Asia, Russia, the Middle East, Canada and Brazil is on the rise. Bailey says the outlook for central London remains relatively positive compared with the rest of the British market, primarily on the back of rising demand from offshore investors. Continued demand from international buyers is underscored by the fact that in the 12 months to June, 50% of all new build apartments in central London were bought by foreigners.
Bailey says city bonus money earned by London professionals will provide further support to central London’s housing market over the next few months. “While bonuses are expected to be more varied this year than in 2009, there’s very early evidence of bonus buyers coming into the market to look at available stock. Our expectation is that bonus buyers won’t rush into the market in December but we’ll see a more delayed process, with the market strengthening in January and February as those buyers wait to gauge the short-term direction of the market.’’
But Bailey warns the post-crash bounce in London house prices is set to slow over the next 12 months on the back of austerity measures introduced by Britain’s new government earlier this year, such as tax hikes and social spending cuts. Another key factor that could put a brake on property’s recovery is rising interest rates. Bailey expects rates to begin to climb early next year from their current historic lows.
