Advice and Opinion Research

Favourable property outlook in the UK and Australia for Southern African investors

The United Kingdom and Australia remain attractive destinations for Southern African investors looking to expand their property portfolio, according to a new report from property investment firm IP Global.

The UK government’s drive to create a northern powerhouse of jobs, investment, and prosperity, closing the economic gap between north and south, is expected to bring more than £18-billion to the region by 2030.

This has contributed to the positive economic growth of the country’s second city Manchester, which has become a hub for the digital and new media sector, attracting firms such as the BBC and Google. In addition, the financial services sector now contributes more than 21% of the city’s gross value added (GVA) and 65 FTSE100 companies have set up shop there.

The rapid population growth of the city has seen a boom in the construction business as the demand for residential units increases. According to IP Global’s 2015 Global Real Estate Outlook (Q1), property values are rising quickly, with an 8.4% year-on-year increase in Q4 2014. Current prices are considered 18% below peak and growth is expected to increase beyond the 22.2% forecasted for 2018.

London locations, however, are still showing particularly high potential for strong returns as price growth spreads from the city centre. The UK capital’s population has just surpassed its 1939 peak of 8.9-million, and is now expected to reach some 11.3-million by 2050. The city meanwhile continues to wrestle with a housing shortfall that is a long distance from meeting demand.

The small slowdown in growth at the end of 2014 should be put in the context of an average price increase of 11.1% throughout the year. Forecasts still point to growth of 22% in the years up to 2019.

Elsewhere in the world, Australia is now one of the top three destinations for Chinese investors and this has helped drive the Sydney residential sector. The city continued to lead the national property market with 13.1% annual growth across all dwellings in the year to October, while the median apartment prices were up 9.6%. Rental markets remained strong, despite the high price growth, with typical yields at 4.5% in the same period.

Brisbane, now a key economic hub for the Asia-Pacific region, is living up to its status as “Australia’s new world city”. The economic success saw land values in the inner city suburbs rise by between 10 – 20% last year and the surge in population growth has pushed the vacancy rate down to 2.2%. This ensured rentals yielded the forecasted 5% for Q3 despite the rise in market prices.

Similar growth is also found in Melbourne, the popularity of which is adding more than 90 000 new residents annually. Apartment prices rose by more than 5% in Q3 2014, continuing a decade-long growth trend. The property market remains attractive, especially since Melbourne has been voted “the world’s most liveable city” for the past four years. Added to this is the government’s commitment to invest AU$11-billion into the city’s public transport infrastructure.

George Radford, Director, Africa at IP Global, which has offices in Cape Town and Johannesburg, said, “Property investors in South Africa and Zimbabwe often have an emotional or historical link to the UK or a personal connection with family or friends who have moved to Australia. In years gone by the trend was to purchase real estate in the UK, especially London, for personal use, but today more and more people understand the benefits of buying property in strong, stable cities as part of their long term investment plan.”

Source: IP Global