Historically, the UK real estate market has long been an area of attraction for foreign investors. In recent years, African investors have also been increasing their attention to UK properties. So, what is specifically driving this investment boom, and why are UK properties so attractive to any foreign investors?
Let’s look at the reasons why African capitals are interested in UK property.
The reason why African Investors are Excited About UK Properties?
First, let us understand why property only, why not any other assets.
Hard assets like property are a smart investment type for safely storing capital in the present economic environment. As many real estate investors like to say, the value of property cannot be zero. That means investors will have less exposure to high risk when making an investment into this asset class. Whether this is through commercial property or residential homes and buy to let.
The exceptional performance of the Warehouse sector
One key reason African investors are finding the UK property market attractive is the strong performance of the warehousing sector. Over the past two years, yields for prime warehouses in the UK have risen significantly, from 3.25% in August 2021 to 4.75% today. This indicates that the purchase price of Grade A warehouses has decreased by up to 30%. The price drop, coupled with increased demand from third-party logistics (3PL) and e-commerce players, is creating an attractive investment. Additionally, the limited supply of Grade A warehouses makes them even more attractive to African investors looking for stable returns and long-term growth in the UK property market.
Stability and Growth
As with many countries, there is a shortage of residential property in the UK – this means there has been a significant amount of new build homes developed in the last couple years, but there is still very high demand for property and further growth. Africa is a constantly developing continent. However political and economic uncertainties can sometimes make investment decisions challenging for investors.
Despite periodic ups and downs, the UK real estate market has historically shown perseverance and has displayed consistent gain over time. The UK and London in particular attracts famous architecture design firms and buyers from around the World This stability particularly attracts African investors who often want to protect their capital and generate consistent returns amid global economic uncertainties.
Diversification
Institutional investors know that diversifying across different economies increases the likelihood of consistent returns, even when there is a global slowdown. African investors
Buying real estate in the UK gives African investors a means to diversify their holdings internationally. By allocating funds to overseas real estate assets, investors can mitigate risks associated with local market volatility and currency fluctuations.
A Stream of Income
For many investors, the primary motivation for entering any foreign market is to generate an extra source of income. Commercial real estate in developed countries offers advantages such as a strong tenant profile with a longer lock-in period. The UK for example has a 10-year lock-in- period. Lock-in-period means both landlord and tenant are locked in a deal for 10 years, ensuring fixed rental income to the property owner.
Citizenship Benefits
Lastly, the potential for residency and citizenship benefits can be another compelling factor driving African investment in UK properties. By buying property in the UK investors can provide their kids with a better education and career opportunity.
Residency usually leads to citizenship after a certain number of years has passed. Gaining a second passport opens up the possibility of renouncing their African citizenship.
Diversification, the potential for high return in the warehouse sector, and exposure to developed market currency are the key reasons for African investors to invest in UK property.