CAPE TOWN - A Global Real Estate Report revealed that there are promising spots for property investment.
Even though the trend of South African real estate investors is to keep their stock in stable, safe-haven destinations like London due to the economic stability and the steady rates-of-return, a global investment report unveiled some new appealing pockets of value.
The Global Real Estate Outlook (GREO) biannual report by property investment firm IP Global, analysed the viability, performance as well as the future potential of cities throughout the world in terms of residential property investment.
New cities that have attracted attention this year include the European capitals of Lisbon and Stockholm, as well as Frankfurt and Dusseldorf in Germany. Making them compelling investment hotspots are their booming economies, rising populations and house prices.
Director of Africa for IP Global, George Radford said: "Real estate investors from South Africa, Zimbabwe, Namibia, Botswana, Zambia, Kenya, Tanzania, Angola, Ghana and Nigeria have consistently shown a healthy interest in UK property in particular. On a global level, places like London, Berlin and Chicago remain very popular due to their stability and growth potential but we are seeing increased interest from these Sub-Saharan African investors in regional UK markets such as Manchester, Liverpool, and Birmingham, as well as other key European cities."
Radford said in most cases South African investors typically prefer to purchase buy-to-let international residential properties for diversification and capital protection purposes, as well as income-producing assets.
He said this is because they are more tangible than other property investments such as property funds.
"While their one or two-bed units are rented out their tenants cover their bonds, and they can look forward to owning the property outright in years to come, or passing the asset onto the next generation," he said
"Investors looking for greater returns over a 5 -10 year time horizon have now turned their attention further afield. Within the UK, regional cities and commuter belt London continue to offer value and excellent returns. However, outside the UK, IP Global has been championing investment in Central and Western European cities, which have traditionally been overlooked by the market but are thriving."
The UK is featured very strongly in the report with a number of locations being highlighted.
Increased government spending in the region, the construction of new high-speed railways, and the continued population growth are all combining to drive demand in the midlands and also the northern powerhouse cities.
The capital's population continues to grow and a lack of housing means that by 2021 prime central London prices are expected to appreciate 15.2% with Greater London house prices rising at a faster rate of 19.2%.
Manchester's property prices are forecasted to increase by 28.2% from 2017 - 2021, however, more affordable house prices, when compared with London, are attracting well judged overseas investors that are looking to diversify their portfolio.
Birmingham continues to grow with a regenerated city centre and the largest concentration of businesses in the UK outside of London.
According to IP Global "Rental yields have grown 24% in Birmingham's city centre over the past 12 months, and are expected to continue rising as transport links with the capital improve."
Outer London still remains a solid investment choice for global investors and this is due to massive infrastructure investment boosting connectivity as well as a chronic housing deficit.
"The opening of the Elizabeth Line (Crossrail) in late 2018, which will transform the city by carrying 200 million passengers annually, is also driving growth across the capital - unlocking new pockets of value. Once completed, property prices along some parts of the Crossrail route are predicted to rise by up to 20%," IP Global stated.
Liverpool, who was only an "exploring" city in the 2016 GREO report has now joined that list of A-league cities to invest in and according to IP Global, this in part is thanks to the GBP 5.5 billion that has been ploughed into the city in the past decade.
In the last five years, house prices in Liverpool have increased 9% with rental growth predicted at 17.6% from 2017 - 2021.
"Within Europe, Berlin's prosperous economy and population influx have contributed to the German capital recording the highest price rises in the country in 2016, with a year-on-year price increase of 13% for apartments. Similarly, the rental market is strong, with between 5.1% and 6.9% rental growth in the past three years."
Hamburg witnessed their property prices rise by 70% since 2009 and rents are expected to continue rising by up to 9.6% in 2018.
The "Green City" Frankfurt's house prices have increased by 30% in the past five years with population increases of 40 000 by 2020 and 830 000 by 2040.
Dusseldorf, the newcomer to the global real estate report, has seen increases of 65% in property prices from 2009 - 2016 with rents increasing 33% in the same period.
With a 3.5% population growth forecast per annum until 2025, an increased demand is likely.
Lisbon, according to the report, has also caught the eye of international investors. Lisbon is now considered by many to be the "next Berlin." The government offers attractive incentives for entrepreneurs and property investors, driving house price growth of up to 30% between 2013 and 2016.
Vienna boasts a 10.5% average property price increase per year over the past five years and over the last decade it has experienced 10.1% population growth with a 27% increase expected by 2060.
With a 27% housing supply deficit from 2015 - 2017, there is a demand for new housing due to the massive influx of population putting pressure on property prices.
"In order to keep up with population growth Vienna will need an extra 11 000 homes built this year alone," the statement stated.
There is a strong appetite for property in Chicago, who is an important financial and technology hub.
Chicago has 34 Fortune 500 companies and their residential real estate prices who are still at pre-crisis levels, has seen growth of 36% in the last five years, with rents rising by 10% from 2016 - 2017.
However, the regions investors also face barriers to entry, such as fluctuating currencies, the size and cost of global real estate transactions, as well as difficulties with obtaining mortgages.
"That is why we're focusing our strategy on exploring new potential markets in the regional parts of the UK, Europe and the USA as these present local investors with further options to grow their portfolios," Radford concluded.
- BUSINESS REPORT ONLINE