South Africans flock to invest

South Africans flock to invest in UK

Investors from South Africa have been significantly stepping up their involvement with UK assets in an attempt to protect themselves from currency volatility. The last 18 months has seen an increase of nearly 400% in South African investment in UK property.

South Africans flock to invest

The key factor pushing South African investors towards British properties is the continued and significant depreciation of the country’s currency. In 18 months, the rand has fallen by more than a fifth (21%) against the US dollar in the face of political and economic pressures.

This has sent many of South Africa’s investors on the search for international investments that will shelter their money from the instability of their domestic currency. Property in the UK, particularly in London, has proved to be a very popular choice. In the year-and-a-half over which the Rand experienced its 21% loss of value against the dollar, South African investment in UK property rose by nearly 400%. Wealthy investors, funds, and companies investing in the higher end of the UK property market have been particularly active. A prominent example recently has been the purchase of a US$276 million New Bond Street property by Richemont which, though based in Switzerland, has strong South African roots and continues to be chaired by its South African founder.

The capital, in particular, has proved popular with South African investors. London is a very expensive market in which to invest in property, but at the same time, it is considered to be a market with safety as one of its defining features. This naturally makes it a prime target for South Africans fleeing the volatility of their own currency, and does much to offset the effect of high outlays on the market’s overall attractiveness to this crowd. London is also a fairly high-yielding market, as are many other UK regions, thanks to a severe undersupply which is frankly insufficient to meet demand.3980---image2

The attraction of London to South African investors is not merely a product of 18 months of depreciation for the Rand. In 2012, a report by Knight Frank showed that South Africa was a very active source of foreign investment for the London property sector. The country’s investors, the report showed, had a greater London presence than their counterparts from countries such as Germany, Canada, and Singapore.

Few South Africans choose UK property investment with a view to living in the UK. For most, the purchase of British property assets is purely an investment, and recently a stepping up of this approach has fitted well with a drive to seek shelter from currency fluctuations.

Borrowing is also relatively cheap in Europe at the moment, which makes finance for property purchases in European countries fairly accessible and affordable. This is also reported to be a factor helping attract South African investors to European markets, including the UK, rather than other international investment opportunities.

The shake-up of the UK economy that has occurred as a result of the Brexit vote only arising recently, its impact on South African investment in the UK remains to be seen, especially as trade deals between the two countries may well have to be renegotiated. However, the UK property market is still considered relatively stable and likely to endure well in the longer-term. Furthermore, the South African government was quick to issue statements of reassurance following the announcement of the referendum result. In light of this, the country’s investors may well continue to feel London property is a good market in which to seek financial shelter.