PROPERTY: Migration Trends Are Shifting Property Investment Demands
Recent Western Cape Business News
PEOPLE are increasingly on the move for a variety of reasons - from political and economic factors to job transfers, career opportunities, retirement, lifestyle and family considerations.
âPeople also move neighbourhoods to be near work or schools or move to bigger or smaller accommodation at different times of their lives. Statistics show that there are now over 240 million people living in countries they were not born in, many of whom have had to repurchase property in new nations.
Property is predominately seen to be a prudent investment as it provides an individual with a solid income, increases their net-worth and enables portfolio and geographical diversification. It’s characterised as a stable and reliable asset - when compared to more volatile alternatives like stocks and shares - and brings a sense of pride and security, being a tangible, physical asset to pass on to future generations.
âRental property investment
“While not all of these people are buying properties, mobility is driving demand, increasing values and rentals on property investments in attractive relocation destinations,” says George Radford, Africa head of global property investment firm, IP Global.
“In an increasingly uncertain world there has been an increase in the number of enquiries from people who are considering relocation,” says Radford.
The US has the most international migrants, but statistics indicate that a large number of people are also relocating to Germany, Russia and the UK.
“And there is hardly a place on earth where you won’t find South Africans,” he says. “It is well known that the UK, US, Canada and Australia are their favoured destinations with 67.4 % of SA emigrants moving to these countries between 2006 and 2016, according to StatsSA.”
Although a market may make an attractive investment, when purchasing overseas, it is important to understand the entire purchase process as there are also many factors which contribute to the relocation decision.
These include legal and tax implications for foreign investors as well as how and when to apply for a mortgage as the procedure changes significantly as per each country’s jurisdiction.
Radford suggests enlisting a trusted mortgage advisor, as an invaluable partner, to guide you through the process.
As a foreign investor, it is also important to consider the exchange rate and how currency fluctuations may affect the investment in the medium to long term.
Sought-after investment safe-havens
“When looking at countries in which to invest, people look at safe-haven markets as opposed to high risk/reward territories,” he says, “So while Trump and Brexit may cause some uncertainty, the US and UK remain safe havens, continuing to attract investment. Many investors are taking advantage of the opportunity provided by a softer sterling and buying into the UK.“
Once the purchasing logistics have been confirmed, potential investors also need to conduct due diligence on their partners on the ground, assessing the credentials of all involved, from the developer to the property management teams. Additionally, they must understand the local rental market to ensure there is strong demand and future saleability prospects.
Choosing a buy-to-let property can enable investors to repay their mortgage via the proceeds of their rental income.
“We have seen customer buying behaviour change in the last 18 months, with some becoming more cautious due to recent world events,” he shares. “Our clients do not tend to buy trophy properties outright, but use their budget instead to buy multiple properties in multiple locations – using mortgage finance as leverage to maximise their returns and enable their money to go further.”
“We advise our clients to plan their exit strategy from the beginning,” he advises. “Overall, we recommend a 5-7 year minimum hold on an investment property.”
âHigh demand for investment properties in capital cities
This has led to an increase in demand for safe, well-priced property in cities other than the global capitals.
According to IP Global, cities attracting investment based on relocation include Manchester, Liverpool, Berlin, Vienna and Chicago.
In the UK, for example, ‘north-shoring’ has become a growing trend as businesses move some of their operations from London to attractive destinations like Birmingham.
In Ontario, for example, significant increases in property taxes on foreigners are causing property investors to look elsewhere. And New South Wales is considering similar increases in tax on foreign property buyers.
“Once investors have bought their property it is important to constantly asses the value and progression of your portfolio and if necessary re-evaluate your strategy whilst simultaneously managing tenants and property upkeep,” he suggests.
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