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Cape Town - There is an increased appetite among South African investors wanting to diversify into safe haven markets, including the property sector, George Radford, international property investment firm IP Global's director for Africa, told Fin24 on Thursday.
Radford said this trend has especially intensified over the last two years.
"Succession planning and retirement planning are becoming more and more important for these SA investors," said Radford.
“Investor sentiment is undoubtedly dampened by the prospect of political uncertainty, which is why South Africans have historically favoured investing in safe haven markets."
A survey by IP Global found that South Africans are most concerned about costs and currency fluctuations due to SA’s volatile economic climate.
The UK remains the most popular place for IP Global's South African clients to invest, followed by Australia. The US and Berlin in Germany are other destinations the SA clients target, but not as often as the UK and Australia.
"The UK remains popular due to its historical ties with SA and the ease of investing. It is also a stable property market with a low risk," said Radford.
IP Global is currently very active in the greater London area, but has also developed a focus on Manchester over the past 18 months.
"There is a lot going on in Manchester. It is the UK's second largest financial hub and also has a large student population. Many listed companies have regional offices there too," said Radford.
The government is also investing about £7bn in the Manchester area, including expanding the airport and improving the rail connection to London. Property prices in Manchester are expected to grow by 26.4% between 2016 and 2020.
"There is a massive under supply of residential property in Manchester and it is expected that about 50 000 people will be moving there in the near future," said Radford. A lot of properties are, therefore, being bought off-plan.
"Our model is that we go into a market after having done research on both the macro and micro drivers in an area. The bulk of our purchases are off-plan," explained Radford.
Australia is becoming increasingly popular among IP Global's SA clients - especially Melbourne and Brisbane. In 2014 about 10% of them opted to invest in residential property in Australia compared to about 90% opting for the UK. In 2015 about 70% opted to invest in the UK, about 20% in Australia and the rest mainly in the US and Berlin.
Berlin is popular among property investors because it is a political centre, the second most populous city in Europe and the third most visited city in Europe (after London and Paris). The development of a new airport is, in his view, another factor which will positively impact on the property market. Property in Berlin is also about 40% cheaper at the moment than in München, for example. It is estimated that about 60% of Germans rented property in the past, but more and more are now rather buying.
Another interesting trend spotted by Radford, is that more and more South Africans are sending their children abroad to study. Their investments in property are, therefore, also a way of getting a foot in the door ahead of time.
Radford provides the following tips:
Diversification
It is key not to have all your eggs in one basket. Make sure you are well hedged.
Research
Do your research and make sure you fully understand what you are investing in and what the upside and downside are.
Risk
Focus on low risk, stable markets with high levels of consumer protection.
Exposure
Do not over-expose yourself and certainly to not over-stretch yourself.
Partnership
Make sure you are working with a trusted partner with a strong track record.
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