Property remains a sought after investment asset class

© pixelbliss – 123RF.com

"Property, especially during uncertain times, is one of the most sought after investment asset classes," says George Radford, the firm's director of Africa. "Our investors are increasingly choosing to allocate their funds to safe haven property markets such as the UK and Australia, for diversification and stability purposes.

"The low liquidity of real estate as an asset class has always been a favourable point for investors looking to avoid instability. Property markets take more time to react to external influences, and are therefore less likely to suffer from short-term reactions to still unfolding events," adds Radford.

The current economic climate, with all stock markets down - the FTSE the lowest it has been in years, and China growth slowing, sets the tone for further instability this year.

Volatility ahead

According to Radford, the slowdown of the country's biggest trading partner and biggest consumer of commodities - China - is going to have a significant impact on the South African economy during 2016.

"There is certainly volatility ahead for 2016, especially given the fact that we have the worst drought in 20 years expected to knock about 0.5% off GDP growth for 2016, coupled with the rand being devalued 25% against the US dollar in 2015," said Radford.

It's in times of volatility that people need stability most. So why should South Africans be looking to invest in offshore property now?

"People are getting nervous and with inflation forecast at the 6% mark, diversifying into foreign markets makes a lot of sense," Radford explained. "Many of our clients are choosing to invest in core safe haven markets like the United Kingdom, Australia, and Germany."

Short supply

In cities like London, Brisbane, and Berlin, for example, populations are growing, housing remains in short supply and prices continue to head upwards. IP Global encourages its clients internationally to look at five to ten year holding periods, by which time the impact of any short-term economic cycles will be minimised.

Taking UK property as an example, property prices across England and Wales have increased by 211% over the last 20 years. In London, in the last decade, property prices have climbed 82% and 446% over 20 years. Even in undervalued Manchester and Birmingham, past performance reinforces the significant price growth forecast in these markets.

It's during these periods of volatility that investors often appreciate bricks and mortar more than ever," Radford concluded.