Brexit bargain buys for SA citizens

The timing may be ripe for South Africans to buy property in London as softening property prices and a weaker pound pave the way for discount purchases.

Multiple industry reports and experts point to a loss of UK housing momentum spurred by Brexit and increasing political uncertainty. Latest figures from UK-based real estate firm Rightmove indicate London property sellers cut prices for the second time in three months this year.

Property prices also dropped 2.4% in June, the largest drop since 2010, according to Rightmove. Properties across the UK fell 0.4% in June, the first property price decline since 2009.

Since the June 2016 Brexit referendum, the pound’s weakened 20% against the rand.

Andrew Golding, Pam Golding Property (PGP) CEO, said it’s seen increased enquiries about purchasing investment residential properties in the UK and other offshore markets in recent months.

“If you take London prices that have reduced in pound terms over the years and depreciation of the pound against the rand, buyers would be achieving on average 30% discount on property purchases.”

South Africans are buying entry-level one- or two-bedroom apartments at £200 000 (R3.4 million) to £400 000 (R6.9 million) for buy-to-let purposes.

Properties in the southeast and east of London, including in Greenwich, Woolwich and Croydon, are reported to be popular with South African buyers. Other regional cities including Manchester, Liverpool and Birmingham are sought after as they’re in proximity to infrastructure improvements.

Golding said enquiries from South Africans to diversify are driven by discount purchases, increasing economic and political uncertainty and SA house prices barely keeping up with inflation. The downsides are:

Expect to pay tax: mainly a Stamp Duty Land Tax (equivalent to SA’s transfer duty tax). This is levied on residential property purchases over £125 000 (R2.2 million).

The rental market in prime central London appears to be under pressure as, according to Knight Frank, landlords achieve flat prime gross rental yield of 3.1%.Another concern is value for money. For example, R13.5 million buys a London property that’s only 30m², compared with a Cape Town property at 209m².