Post-Brexit Pound Volatility
Post-Brexit pound volatility may offer excellent investment opportunities: In2assets (Article courtesy of SA Commercial Property News) The weak post-Brexit pound has opened a window of opportunity for South Africans to invest in the UK property market.
Post-Brexit pound volatility may offer excellent investment opportunities: In2assets
(Article courtesy of SA Commercial Property News)
The weak post-Brexit pound has opened a window of opportunity for South Africans to invest in the UK property market.
The rand, which was trading at R16.60 to the pound this past week, has strengthened from R24.50 in January as the fragile pound continues to trade around its lowest levels against the dollar since 1985.
The rand’s strength has been bolstered by pound weakness as well as news that the National Prosecuting Authority has dropped fraud charges against Finance Minister Pravin Gordhan.
The weakness of the pound indicates that South Africa is not alone when it comes to political and economic uncertainty and currency risk. With the election of Donald Trump in the US, underpinning investor nervousness and the slowdown in China’s economic growth has caused global ripples of uncertainty.
Despite the pressure on the pound, there are positive investment indicators coming out of the UK. GDP in the third quarter, although muted at 0.5%, was better than expected and the property market’s supply shortfall continues to put upward pressure on prices, which reflects in good increases in the value of property investments in the UK.
“Importantly, interest rates in the UK have been cut from 0.5% to 0.25%, against South Africa’s March increase from 6.75% to 7%,” according to George Radford, Director of Africa of property investment firm IP Global.
“I’m still very optimistic about the UK economy. In fact, a World Bank report recently ranked the UK the seventh best country in the world for ease of doing business, while countries such as Germany and France - which are now courting UK businesses to relocate to their cities - were ranked 17 and 29 respectively. The UK has much less red tape, a friendlier tax environment and is, of course, English speaking.”
“If you look at the property market, it is still structurally undersupplied. It needs 250 000 units per year. Currently 156 000 are delivered, which represents an annual shortfall of almost 100 000 units. This continues to put pressure on house prices.”
Radford says Southern African investors have shown a preference for the UK and Australia, due to the shared historic connection, followed by Europe and the US.
(Edited by In2Assets)