The property market in the UK is showing excellent growth, while the real value of South African house prices is declining, making now the time to hedge your South African property investments by investing in the UK property market.
International property specialist and Hurst & Wills director Lisa Bathurst said with the slow growth at home it was a great time to diversify into offshore markets, creating a better global wealth strategy.
“South Africans are vulnerable at the moment,” said Bathurst. “As an emerging market, South Africa’s economy is impacted by external factors out of our control. Add to that the external debt, inflation and low employment figures and it seems likely that the negative growth will continue for the next two to three years.”
In July, the FNB Property Barometer showed that when corrected for inflation, SA residential properties had dropped in value. While year-on-year residential properties grew by 4.1percent, with the Consumer Price Index at 4.6percent, real property prices are decreasing.
FNB’s household and property sector specialist, Johan Loos, said South Africa’s slow economic growth meant we could expect year-on-year house price growth to be adjusted even lower to 3.5percent for this year, down from 4.3percent last year.
Nedbank’s senior economist, Nicky Weimar, echoed this negative outlook for the local market. She said although President Cyril Ramaphosa’s proposed interventions to boost the economy were a step in the right direction, they had failed to translate into economic growth or job-creation, because he had not been clear on policy around the land question.
At a recent Rode REIM conference, Weimar said she believed the rand would remain unchanged against the big international currencies for the next few years. “This suggests it may be unwise to hold off for a better exchange rate before investing offshore, considering the December 31 deadline for this year’s offshore allowances.” said Bathurst.
The SA Reserve Bank (Sarb) allows South Africans two offshore allowances annually. The single discretionary allowance of R1million is available without having to obtain a tax clearance while the capital allowance for up to R10m requires tax clearance from the Sarb.
“These allowances can be doubled if you are a couple. With December 31 approaching, people who want to use these allowances for 2018 need to act fast.”