The other day I was listening to a talk by the CEO of a well-known tax and retirement planning company in South Africa and he made a comment I had not heard before but one that I will not forget: ‘Live in the sun but invest in the shade’
1. Benefit of investing in an offshore currency He said most of his African clients invest some of their money overseas in hard currencies. He briefly mentioned the political climate of South Africa, the security, load shedding, volatility of the currency and that his clients felt more confident once they had taken some of their income out of South Africa. As someone that has recently moved to South Africa and sees all it has to offer, I found this discussion a little negative but at the same time it did make sense that his clients would want to do this, especially now the Rand is at 22 to the UK pound. I am in the fortunate position of having a UK passport, owning a UK investment property and being able to return to the UK whenever I want.
2. Ability to become a global citizen! A South African passport holder is more limited in where they can travel, live, and work and therefore this statement rings true. If you can take rand and invest overseas you can make it work harder for you and give yourself the opportunity to achieve greater global independence.
3. High yield performance of the UK property market The UK property market has always maintained strong stability and resilience, despite the many challenges that it has faced; financial crashes, Brexit, changes in the monarchy and government. The past 50 years of the property market has seen 43 years positive growth, so it is not surprising it is one of the most popular investment assets. 85% of property investors around the world choose to invest in the UK market.
4. Favourable UK mortgage interest rates This week has been especially good for the UK property market with the news that there has been a drop in UK mortgage rates, which are now set to remain between 4-5% in 2023, having been around 6% at the end of last year. A South African looking to invest money offshore would benefit from this drop in interest rates but also the soaring demand of the UK rental market, which is still making headlines. The Telegraph reports that rents have risen 8.3% in the year to January and a statement from Knight Frank read “this is the best rental market we have seen in years in terms of price and demand”. If you are a South African who loves the idea of investing offshore and having the ability to create an income in a hard currency, perhaps now is the time to strike whilst the iron is hot.
5. Leverage your investment through a UK mortgage! As a South African you can borrow from the UK banks and benefit from an interest only mortgage (bond); the rent pays the mortgage so you can start to build an income in UK sterling.
6. Opportunity to invest in top performing areas Currently the top 3 performing UK markets in terms of price growth are Nottinghamshire (+9%), Birmingham (+8.1%) and Manchester (+8.1%). In 2021, Newark, a beautiful historic town in Nottinghamshire saw a remarkable 20% increase it its house prices. It is therefore no wonder that LIO International saw 3 of its clients this week alone invest in Nottinghamshire and one of its Birmingham projects sell out within 2 months of launch. One of our latest projects in Manchester, a 7-minute walk from Manchester Piccadilly (the major train line direct to London) offers 7% rental yields, more than double the UK average. House price growth in Manchester is anticipated to increase 19.3% by 2027. Given these statistics it is understandable why such a high percentage of property investors from around the world choose to invest in the UK market. With competitive returns and almost no restrictions on foreign investment into property the UK still remains an excellent place to hold property for South Africans in particular.
