Investing in property in UK, USA, UAE vs. South Africa

When it comes to investing in property abroad, investors and developers have a smorgasbord of choice available to them.

Overseas property investments are particularly attractive, given the current talk of a worldwide property boom, claims of better capital growth and higher rental yields.

But can this be said about every overseas jurisdiction? Here Paul Rothschild, former CEO of Platinum Luxury Design & Development (PLDD) and advisor to luxury property development and management companies gives his view on investing in the UK, USA and UAE and compares it to what’s on offer in South Africa.

United Kingdom

The pros: When the pandemic hit and the UK’s stringent lockdowns were in place, few predicted that the impact on house prices would be a positive one. By the end of 2020, house prices in the UK increased by their highest levels since 2015, according to Nationwide Building Society.

Rothschild says that Birmingham is one of the key investment areas for property developments in the UK. ‘Its Big City Plan is unfurling with more development projects coming on board as the UK’s second city begins preparations for the 2022 Commonwealth Games. According to JLL, Birmingham will be the fastest growing city by 2026 and property prices will have risen by 19.5%.’

The cons: Property prices escalations may just be going through a honeymoon phase, partly because of the Stamp Duty Tax holiday which ended on 30 June, 2021. Experts predict that things could prove more subdued from this point on.

What’s more, the UK is the most likely to experience a property price crash in the near future. ‘I think the UK could be heading for a housing market crash. While the market has recently been at its strongest since 2015 (before Brexit was even mentioned), it’s important to be aware of the fallibility of the sector,’ says Rothschild.

The United States

Just like the UK, the US is experiencing a resilient housing market with prices being fuelled by low interest rates, record low mortgage rates and stronger housing demand.

The pros: Rothschild says: ‘Housing stock is in short supply, so for investors there are huge opportunities in this Covid-19 influenced seller’s market.

‘Across the US, single-family rental investors are likely to do best, with this specific asset class predicted to grow throughout 2021. The Census Bureau reports that single-family rentals had the highest occupancy rate since 1994 by the end of 2020. This is leading to investors seeking out developers to form joint ventures to acquire and operate rental sites particularly across Florida, Texas, the South East US and Western US.’

The cons: Rothschild says that political risks, including tariffs, can impact investor decisions when it comes to property investments in the US.

‘Uncertainty surrounding the regulations and municipal requirements for development and a perceived lack of transparency on fiscal and legal governance are also areas of risk for investors. Political risk also exists at state level, with uncertainty surrounding the potential for increased policies that restrict both developers and investors,’ he says.

The United Arab Emirates (UAE)

The pros: As the vaccine rollout improves across the UAE, more opportunities for property investors could present themselves.

Rothschild explains: ‘Covid-19 has led to a fall in property prices, which opens the market to a wider demographic and is great for investors who want to take their first steps in this market.’

He adds that off-plan developments are more popular with investors than traditional property. ‘Measures implemented due to the pandemic has led to a surge in investor interest in off plan developments. Popular locations for these investments include Dubai Land, Dubai South and Tilal Al Ghaf.

The cons: There are still major risks to investing in the UAE. ‘These range from construction problems to endless vacancies when it’s delivered at the end of the construction and development phase. Ultimately, investors are gambling on the property being filled and construction going to plan.

‘Continued uncertainty driven by the pandemic make the outlook murky for the UAE, with some cities dealing with oversupply and others holding strong. It’s a complex region with complex parameters to consider,’ he says.

South Africa

The pros: Rothschild believes there are definite investment opportunities in South Africa only if developers and investors adopt a longer-term approach.

According to PwC the economy is expected to return to pre-pandemic levels by 2023, which Rothschild believes will give investors time to strategise their interests. Interest rates remain low for now which could also fuel the interest in the property sector.

The cons: Economic uncertainty and the slow progress with the vaccine roll-out could still put investors off, says Rothschild.

He adds that developers and investors need to do their research before committing to South Africa. ‘Selecting the best property type for their strategy is key to investor success, as well as the best location. Before the pandemic, this was much easier to define, with Cape Town the most lucrative city in South Africa.  While the vaccination uncertainty continues, however, investors may be best placed consider their options before making decisions,’ he says.