Despite the pandemic and other challenges faced in 2020, the residential property sector in Britain has shown resilience and is growing, and can offer South African investors a stable income with excellent long-term returns.
For South Africans, investing offshore has always made good sense as a way to diversify their asset base and spread risk. But in a Covid-afflicted world, many of the traditional investment strategies no longer make the sense they once did.
Stock market volatility, low-interest rates and poor to non-existent dividend payouts all make the case for investing in offshore residential property as a key building block to portfolio construction, which still offers an attractive proposition for investors seeking stable long-term growth. “Some people worry about property’s lack of liquidity. But, at times like this, it is a strength because property is less volatile than most other investment options,” explains Bradd Bendall, Group Sales Director at Carrick Wealth. He adds that, as a financial advisor, Carrick Wealth puts a strong emphasis on due diligence within its property portfolio, ensuring a solid investment case coupled with a long-term partnership approach.
UK residential property performing well
The residential property market in Western Europe has traditionally provided good, stable returns. One of the star performers at the moment is the UK, where demand for housing far exceeds supply. Home loan approvals are at their highest levels in more than a decade and 2020 house prices enjoyed their biggest annual increase – 7.3% year-on-year – in six years, according to figures from lender Nationwide.
During December 2020, property data company Hometrack reported that Britain’s housing market “had its busiest Christmas in over 10 years”. Home loan approvals for the year were at similar levels to 2019 when, of course, there was no coronavirus and associated lockdowns.
These factors emphasise the enormous depth of resilience – and investor potential – in the UK residential property sector. And, while a stamp duty ‘holiday’ that helped drive some demand is due to expire at the end of March 2021, many analysts predict that demand will continue to be strong.
Reasons for this include an ongoing shortfall in residential housing of around 140 000 homes a year, low-interest rates that make property more affordable, and the shift to working from home that is driving demand for larger suburban and rural properties.
Ultimately, says Bendall, for any investor the bottom line – coupled with the focus on externalising wealth – makes the investment case in this buy-to-let market. “There are many, many options in the UK, from an entry-level at around £80 000, up to £1.5 to £2 million,” he explains.
Creating opportunity for SA investors
To assist South African investors looking to take advantage of this dynamic opportunity, Carrick Property – a division of Carrick Wealth – has partnered with leading developers and a reputable and experienced global real estate investment company with sound knowledge of the UK property market.
“Global instability certainly creates opportunities for astute offshore investors,” emphasises Bendall. “A carefully selected UK property investment – even an entry-level programme – can provide a solid rental income at a time when many investors in stocks and shares will see no dividends at all.”
By leveraging our joint expertise, investors receive an end-to-end service that includes: due diligence relating to property developments, their investment potential and locations; assistance with securing financing; arranging local lawyers to handle the transfer of a property and the associated legalities; securing tenants; handling day-to-day property management; and arranging future resale if required.
Carrick Wealth clients thus have access to property developments with excellent potential in towns and cities to the north of London. These include Bracknell and Slough – both relatively close to the capital – Birmingham in the English Midlands and Leeds, Liverpool and Manchester in the north of England. All these locations have excellent urban regeneration programmes which are converting old shipyards and docklands into highly desirable mixed-use areas. Further investment opportunities are planned for Sheffield in northern England and Glasgow in Scotland.
Each of these areas has been carefully selected for their investment potential and wide variety of returns, explains Bendall. “Returns in London, for example, are not as good as returns in Birmingham, which are not as good as the returns in Glasgow. What we are trying to do is educate potential buyers as to the different options available. Just 45 minutes out of London, there is a whole array of different properties that are available and which are attractive to South Africans, while in London there are still pockets of value as can be witnessed by our latest development.”
This sort of sector insight is critical, says Bendall, as it supports decision-making based on extensive due diligence, rather than following the crowd.
“Investors also need on-the-ground local knowledge to mitigate potential pitfalls and to access solutions,” advises Bendall. “My primary suggestion would be to ensure you’re using a letting agent and a reputable company. In every development we get involved in, we go through due diligence, so it’s almost a package deal. We manage the process with the client, from A to Z.”