By Xolile Bhengu
Local property investors have an opportunity to invest in the UK property market as values in the short term continue to drop — by as much as 20 percent.
The Broll Property Group said the UK property market had suffered some knocks in the past year.
Due to the impact of global market volatility on the British banking sector, there has been upside in property lending. This has made it more affordable for SA investors to access commercial property investments.
The company said the UK commercial property sector had gone through a significant slump, with capital values falling an average of 15 percent since June 2007.
David Adams, investment broker for Broll, said some UK properties, which had long strong tenancies, now had net incomes greater than the repayments on a property that is 100 percent financed.
He said unlike the UK, South Africa’s commercial property market had not been hit by the credit crunch, and many investors had built up significant equity in their portfolios, but investors had limited themselves to local opportunities.
“The diversification play of investing in UK property brings the advantage of investing in a property sector that has already seen a significant correction, and is attached to first world currency in a very stable country.
“The highest yields are typically in the industrial sectors outside of the South East (of the City), where 8 percent returns, and even 8.5 percent in some cases are achievable,” Adams said.
Catalyst Group agreed that the UK’s listed property — particularly in the last three to six months — was trading at a discount to net asset value.
Paul Duncan, investment manager for the Catalyst Group, said in the short term the volatility in the property market should remain, but long-term prospects in offshore investments were looking good.
Duncan said that developed markets such as the UK were well understood and trusted by investors across the globe.
“There is relatively more confidence from foreign investors in the UK as a transparent and well understood market, in which there is readily available information,” he said.
“Any investor must do research to ensure that the returns they expect will be worth the risk, and whether they will achieve the returns that they demand.”