South African institutions leading charge for overseas real estate

South African institutions leading charge for overseas real estate

The UK is offering the shelter South African investors are seeking heading into a stormy second half of the year.

Summary:

  • The South African property market is expected to stall further in the second half of 2015
  • Property funds in the country have already begun to diversify their investment portfolios overseas
  • Individual investors seek the stability and growth opportunities offered by UK property

Some of South Africa’s biggest property funds are turning away from the domestic market and looking to overseas real estate investment.

Monthly home sales are averaging 22,640 for the first six months of the year, which is a fall of 6.2% on 2014’s figures and property values in South Africa are expected to drop further over the course of 2015, with economic conditions deteriorating.

Consumer confidence levels in the country have hit 15-year lows, while interest rate rises of between 0.25% and 0.5% are predicted to come into effect before the start of 2016.

Neville Berkowitz, Property Economist and Adviser to HomeBid, said: “I have been in the property market since 1973 and I have seen numerous upswings and downswings and make no mistake, we are in a downswing.

“The public needs the transparent facts so they can make correct decisions about buying, selling or staying in their current home, which invariably is their most valuable asset.”

Property funds in the country have already made their decision to look to secure assets in Europe.

Catalyst Fund Managers Investment Manager Paul Duncan explained why offshore acquisitions were becoming increasingly appealing to many South African funds.

He said domestically, the basics of the property market remain “challenging” and it is difficult to generate any organic earnings growth, while offshore markets had a better relationship between real estate cap rates and funding costs.

Many individual South African investors are looking to the UK to offer the portfolio security they need. British residential and student property assets offer both a hedge against the deteriorating rand and high yields.

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