What a rosy UK property sector may mean for South Africans

Many countries face political, social and economic uncertainty, and SA is no exception. It is common for local families to look to the UK, London particularly, in search of stability and the knowledge that their hard-earned money is invested, protected and growing for future generations.

UK property can offer unique opportunities as it can fulfil these goals while also establishing a base for those who have family living or working in the UK — as is so often the case. Broadly speaking, interest rates also tend to be lower in the UK, it’s a family friendly place to live, you’re a stone’s throw from the rest of Europe and there are ample top-tier education and career opportunities.

While Britain is always a popular choice for SA families, ominous soundings about the property market there a few months ago — including forebodings of multiyear losses echoed from respected analysts — left it cloaked in pessimism. But the tide is turning slowly, revealing a new picture of cautious optimism. A looming drop in interest rates, once a distant possibility, has now emerged as a beacon of hope, potentially unlocking renewed activity.

However, buyers should be braced for a slower pace. Gone are the days of breakneck price surges; the market is adopting a more measured stride. Dizzying increases may be a thing of the past, replaced by a balanced — and potentially more resilient — landscape. While challenges still persist, the shift in sentiment is undeniable. The market is finding its new rhythm for local and international buyers alike.

Primed for lift-off?

There’s also good news for the prime central London market. Hampered by single-digit growth in recent years, the city’s “golden postcodes” are now ripe for appreciation. The five-year outlook for Hampstead, Knightsbridge, Chelsea and Mayfair has jumped from 8% to 18% in a matter of months.

A steady, gradual rise favours those looking to make a purchase without undue pressure. However, UK estate agents are telling us they are seeing enquiries rise and new listings dwindling, so the lack of pressure may not last long.

Despite a cool-down in house prices across the UK (down 2.1% in the last 12 months, according to the latest Office for National Statistics data), cash buyers are driving growth in certain pockets. This comes after a post-pandemic boom where some areas, particularly rural regions, saw price surges of 20% or more.

Data shows cash buyers are making up over 40% of all transactions — more in prime locations such as central London. Usually the number is about 30%, but good cash deals have driven the figure up. Cash won’t be king forever though, with mortgage rates likely to enter a declining trend we’d expect to see cash buyers decrease in favour of debt.

Quality reigns supreme

London, like many cities about the world, saw a mass exodus during the Covid-19 pandemic as countryside locations became more popular with the arrival of remote working and pandemic-induced anxieties. At the same time, international interest dropped.

This appears to be changing as the perks of city living come back into focus, and buyers from SA and beyond look again to London as a base. Interestingly “best-in-class” properties remained resilient throughout these market fluctuations, demonstrating their enduring appeal.

But it’s not just London seeing demand from SA buyers now. Those familiar with the UK will know how well connected it is. Arterial routes out of London quickly lead to Surrey, Berkshire, Kent and Essex for those still drawn to more rural living. Similarly, even better value for money can be found in rural parts of South Wales where cities such as Cardiff, Bath and Bristol are still close by.

Size matters in London

New planning restrictions are also playing into the changing market dynamics in prime central London. Local authorities, including Westminster and Kensington and Chelsea, are imposing size restrictions on new developments. In Westminster a strict 200m² limit on new builds is enforced, while Kensington and Chelsea has less defined regulations, but is focused on restricting the number of “oversize units”.

Close to two-thirds of all £5m-plus new builds sold in London since 2021 were larger than the 200m² threshold, so the potential effect is obvious — fewer large new builds will probably drive up the prices of existing large and sought-after homes.

To sum up, a cautious optimism is creeping back into the UK property market, which will be welcome news to prospective buyers. Easing mortgage rates and a city living resurgence are all fuelling this sentiment, as well as the return of international investors seeking perceived havens in stable and familiar markets.

Geopolitical tension and a looming UK general election add further complexity to property choices, but there’s one thing analysts largely agree on: in contrast to the last UK general election in 2019, we are unlikely to see large-scale policy shifts, regardless of the result.

It’s important to navigate this evolving landscape with prudence and seeking expert advice on property decisions is recommended, but electoral anxieties or global events needn’t paralyse these decisions entirely. Cautious optimism is optimism nonetheless, and the UK remains a prime location for South Africans looking for a UK base.

• Prabhu is CEO of SA and market head of Africa, and Moroukian head of product and proposition for real estate financing, at Barclays Private Bank.