The UK’s population dynamics stands in stark contrast to that of South Africa.
According to the Office of National Statistics (ONS), the UK population is set to hit 70m from the current 62.3m in 16 years. This is a growth of 12.3% in 16 years which is DOUBLE that expected for SA over the same time period (SA expected to go from about 50.5m to 54m over the same period – source: UN Data, StatsSA).
Unlike South Africa, all people coming to the UK will have a direct impact on the property market and they will need to be housed somewhere – ie it is not possible for the population to grow without a direct knock-on effect on housing as the winters are too cold to live in a lean to/shack/informal housing etc.
More than two thirds of the projected increase is a result of immigration. Of the 10.9 million increase, 5.1 million (47%) is due to projected net migration, 2.3 million (21%) from migrant women giving birth, and 3.5 million (32%) due to the number of births outpacing deaths, before any effect of migration is considered. Officials said the UK’s population was projected to rise by 438,000 a year until 2035 – the equivalent of adding a city the size of Bristol every year.
Although the economic future is far from secure in the UK, the direct pressure on housing means that, while values may not rise aggressively outside of London (London values continue to rise and are now double that of prices in the rest of the UK), there will be an ongoing upward pressure on rents. A very healthy environment for rental return investors.
In South Africa, inflation continues to outstrip nominal house price growth (CPI growth = 4.62% year to date, nominal house price growth of 1.94%) which means that real house prices continue to decline as the SA market slowly and painfully rebalances itself. But with no aggressive population growth to fall back on, what will be SA’s insurance policy be (besides the national credit act)?
Is the economic growth route a realistic way for SA to protect long-term real house prices, or will something more than this be required?