Investing in property outside of South Africa is a good way to get a tangible asset in a stable property market which can be passed down through the family for generations. Here is an overview of the types of UK property investments available to you and your family.
The question of where to invest in property is a major consideration for South Africans. Investment into the UK property market can not only generate a rental income in a strong currency but also provide a safety net for your family’s future.
Your circumstances and goals will determine which investment strategy is best for you. The main property investment types include but are not limited to:
- Buy-to-let property
- Tourism property
- Commercial property (yield investing)
- Buying off-plan
Buy-to-let property
Buy-to-let is the act of buying a property with the intent to let it out to tenants to produce a rental return income stream. You can offer property to potential tenants for either a long term (six months or more) or short term (less than six months). Your choice should depend on the rental demand of the local area.
When considering buy-to-let, reflect on whether you, as the investor:
- Understand the rental market in the UK
- Are buying an appropriate property to suit the demand of the area
- Have a suitable rental agent to manage the tenancy appropriately
- Have the funds to purchase the property or will qualify for a mortgage
Tenant profile
Before investing in any buy-to-let, it’s important to understand what type of tenant you can likely expect to attract. This is highly variable, so it’s essential to get advice from an objective third party with local knowledge of different areas and why they might attract significant tenant demand now and in the future.
Long-term versus short-term
For long-term buy-to-let properties, consider areas of the UK where salaries are higher and unemployment is lower. Opportunities for skilled workers in these areas create a growing demand for rental property. This benefits landlords by making it more likely that they will find tenants who can pay the rent.
Owning a short-term rental home can also be a potentially lucrative investment in your property portfolio. As more people work from home and choose to move further away from their offices, there are likely to be more people travelling to their place of work for a few days at a time. These individuals will be looking for short-term rental properties nearby. Areas such as Birmingham, Manchester and Bournemouth are best suited to this kind of investment.
However, to give you extra peace of mind as the owner, it’s always a good idea to look for a property that allows for both long-term and short-term rentals. Many towns in the UK, like Brighton, have close proximity to the sea and a fantastic community of people living there full-time, making it a strong draw for both professionals and holidaymakers.
Tourism property
This type of buy-to-let investment meets the needs of tourists, such as rental holiday accommodation. It covers everything from rentals advertised on websites, to Airbnb, to guests found through a friend of a friend.
It’s important to note that in many parts of the UK and Europe, a tourism rental licence or permission may be required to rent your property out on a short-let basis.
As an investor, you can take out low-interest debt for buy-to-let and tourism products. Low-interest debt, such as mortgages, that help you increase your income or net worth are examples of good debt.
Read also: A guide to the offshore real estate terms you need to know before investing.
See also: A guide to the offshore real estate terms you need to know before investing.
Mortgages
South African investors are often surprised to learn that getting a UK mortgage from South Africa is possible. In fact, UK mortgages have interest rates significantly lower than those in South Africa, making buying property in the UK an appealing option.
For example, securing a mortgage on a buy-to-let investment property with a higher rental income than your monthly mortgage obligations means that you can potentially use your rental to pay the entire monthly loan amount.
Commercial property
This is a broad category of investment options. In this article, we refer to yield investing, whereby a cash investment is required into these commercially run properties and the expected yields are greater than 8%. These include student housing, retirement care homes, or government-rented social housing, among others.
This type of investment property is primarily aimed at individuals looking to profit from the UK’s property market through a cash investment. It is ideal for someone who does not want to take a mortgage and prefers a hands-off investment and a higher yield.
Buying off-plan
Aimed at the more optimistic buyer, an off-plan investment involves purchasing a new build before the development is complete, at a present market rate.
Buying off-plan is an excellent way to secure a property in a popular and growing real estate market. In some cases, the property value may even increase between purchase and completion, which can be a rewarding way to invest your money. This investment type allows you to get on the property ladder, secure a sale price, and prepare to become a landlord.
The build, at this point, is in the planning phase so this type of investment comes with a greater risk as we rely on the developer to deliver the property as per the plan specifications. We recommend you work with reliable and reputable businesses to help you navigate this process.
Read also: 9 things to consider when purchasing an offshore property investment
Best areas in the UK for property investment
Over the last five years, the UK property market has expanded in both major and emerging cities and regions. Whatever the type of investment property, the cities of London, Birmingham, and Manchester continue to be among the best places to invest, with expected and continued growth.
These areas have attracted significant investment and demand remains high, because of:
- Higher rental returns
- Confidence in the market
- A growing population and infrastructure development
- Government regeneration in key areas
- It’s appeal as a major corporate headquarters hub
Areas outside of the popular cities are also becoming increasingly popular among investors looking to own rental property for long- or short-term rental. Cambridge, for example, has a thriving rental market, partly due to the University of Cambridge and the availability of opportunities for working professionals and university students alike.
Tips for buying property in the UK
- Spend time researching the areas in which you’re looking to purchase property
- Find out where the regeneration and major infrastructure changes are occurring
- Investigate the tenant base and yield potential
- Speak to a real estate adviser with global connections
Property management
Whether it’s a new build or an older one, you’ll always need someone on the ground you can trust. The UK property market is very established in this sense, with the necessary infrastructure in place and the availability of many agents.
Once you’ve completed your purchase of a property, we will assist in finding a local company to manage and run the property on your behalf. This way you can enjoy hassle-free ownership.
Looking to invest in the UK property market to secure a future for you and your family? Sable International’s offshore real estate investment team can assist you in whichever type of investment you’re looking for.
Contact us at [email protected] or give us a call on +27 (0) 21 657 2120. We’ll be happy to answer any of your questions.
