Pressure on UK property market creates opportunities for SA investors

Recent changes in the UK’s mortgage lending system are putting certain categories of home owners under increasing pressure to maintain their monthly mortgage repayments and many are being forced to sell or face repossession of their homes. This has created an opportunity for South African investors who are looking to move into the UK property market.

International Property Solutions (IPS), in association with Residential Investments, one of the UK’s leading ‘Buy and Rent-Back’ specialists, is at the forefront of assisting South African investors to purchase these homes for an initial investment of £30,000 which is cash positive from day one.

“The principle behind the Buy and Rent-Back model enables a home owner to sell his property to a landlord or investment company in return for staying on as a tenant in the property for a specified term. This offers a solution to troubled homeowners and, at the same time, creates an investment opportunity,” explains Scott Picken of IPS which has offices in South Africa, London, Dubai and Australia. “In general UK property investment represents excellent opportunities for property investment in terms of capital appreciation and rental incomes, as well as being a Rand hedge. Specifically Buy and Rent-Back is an accessibly and lower-risk entry point.” IPS specializes in international property investment and straightforward and effective solutions for South Africans to invest in properties in other countries which provide positive investment opportunities as well as for international investors to access the South Africa investment property market.

South African investors have access to five different classes of homes: The Prestigious (approx £500,000); The Executive (approx £350,000); The Professional (approx £250,000 average); The Working Class (approx £100,000 average) and The Social Class (less than £90 000). “We have targeted The Working Class category as it is the only one which is near the bottom of its growth cycle and is already selling for about £160,000 in certain areas,” says Picken.

“The Stamp Duty threshold being raised from £125 000 to £175 000 has also had a big impact on the UK market, like it did in South Africa when it was raised from R150 000 to R500 000.”

Investors have the opportunity to select from a range of existing homes, with prices starting from £65,000. An initial investment of £30,000 is required. Rental agreements are structured on a five to 10 year lease with a 5% escalation per annum, and the investment is designed to be cash flow positive from day one.

Properties are spread across the UK and Ireland, with the north-east of England currently an excellent source of investment property.

“The majority of our better quality Buy and Rent-Back homes in this region are still at or near the bottom of their capital growth cycle, which means enormous potential for growth,” enthuses Picken. “We have also doubled our buyers in London, as there is significant demand in this area from investors.”

All homes are quality inspected and valued by the Royal Institute of Chartered surveyors. Properties are semi-detached homes (not apartments). Lease agreements are in place from day one and are actively managed. Rent covers the mortgage and other costs. Tenants are responsible for their own internal maintenance and decorating.

Picken explains that many of the properties are sold with a genuine £5,000 to £20,000 built-in equity.

“We have a large selection of properties available and investments can take place with immediate effect,” says Picken who notes that it takes roughly eight weeks from the decision making process to the transfer and register.

Picken explains international property investment is becoming more common in the ‘global economy’. “More and more, investors are looking beyond their own borders to find good opportunities and South Africans are beginning to adopt this position too,” says Picken. He points out that, for example, Australians are the largest investor in New York Stock Exchange Real Estate Investment Trusts.

“With the current Rand fluctuations, it really makes sense to take advantage of uncertainty in the UK market and buy a long-term, cash flow positive asset, which will act an ideal Rand hedge,” notes Picken.