Category Expert Insight
SA remains an attractive place for foreigners to buy homes and investment properties, with the Western Cape and Gauteng topping the pile. New research shows that the two provinces accounted for more than three quarters of all foreign purchases in January 2018. Foreign ownership of South African property continued an upsurge this year, showing confidence in the local investment landscape. While a slowdown was predicted, a new Lightstone Property study instead shows an increase of 42% in foreign property ownership in January 2018 compared with the same period in 2017. Gauteng and the Western Cape accounted for 47% and 36% respectively of all foreign transactions. KwaZulu Natal ranks third at 9%. The Western Cape leads in terms of year on year growth, says Lightstone head of property professionals Hayley Ivins Downes. "The province has shown a steady increase in foreign sales in the past five years, which is sitting at just more than 7% of total sales to foreign buyers."
While popularity in the R2m to R3m value band remains high in both provinces, Lightstone data shows the most growth in the Western Cape in the R4m plus price bracket. Gauteng saw its highest growth in the R3m to R4m value band. John Loos, household and property sector strategist at FNB, says the bank's research suggests that foreign sales have declined over the past year. "We have seen foreigner buying estimates as a percentage of total home buying decline from 5.72% as at the third quarter of 2016, to 4.1% of total home buying for the second quarter of 2018," he says. "We have also seen agents estimating lower SA expat buying of South African homes, down from 2.65% as at the end of 2014 to 1.1% in second quarter of 2018". Says Pam Golding Property Group CEO Andrew Golding: "International buyers tend to purchase property across all price sectors". He notes that convenient lock up and go units in secure complexes and estates are most popular among the agency's foreign buyers. Without disputing the Lightstone report, Golding also says Pam Golding has not seen an increase in international sales on an annual, national basis. "The temporary spike referred to by Lightstone at the start of 2018 was most likely because of increased investor confidence due to the change in government leadership," he says.
In terms of buyer demographics, the Lightstone report shows that most buyers are Europeans and Americans. Many are driven by the rand losing ground against the euro and the dollar, says Ian Slot, MD of Seeff Atlantic Seaboard, Waterfront and City Bowl. "Western buyers represent more than 60% of our foreign sales, predominantly from Germany, the UK, Netherlands and the US." Chas Everitt International Property Group CEO Berry Everitt says the demographics are changing. He has noticed an increase in inquiries from African investors. Reasons to settle in SA as opposed to, for instance, Lagos or Nairobi are the favourable climate, good financial infrastructure, relatively low cost of living and a good quality of life. "Lagos is the 28th most expensive city in the world and ranks 212th on the quality of life index," he says. "Johannesburg ranks 199th for living expenses and 96th out of 231 cities for quality of life." Pam Golding Property Group confirms an influx of African investors from Zimbabwe, Zambia, Namibia, Nigeria, Botswana and Kenya. "Many are business executives, either travelling regularly to SA or establishing bases from which to expand their operations in SA and other African countries," says Golding. LUXURY HOMES Everitt says SA is also becoming popular among buyers from other areas. "Indian and Russian investors are discovering that their rupees and roubles buy much more property here than in London or New York. We are expecting the demand for luxury homes to keep growing, especially in estates around Johannesburg and along the North Coast of KwaZulu Natal." At city level, Cape Town and Johannesburg are the favourite metros for foreigners. Lightstone says pockets in the Cape Town City Bowl remain key foreign investment hubs. And Sea Point, which accounts for just above 7% of all foreign transactions, is still the city's most popular suburb, despite dropping sales. The City Bowl's popularity does not surprise RE MAX Living sales associate David Spence. "Proximity to places of work, schools, excellent service delivery, the security infrastructure as well as the area's infectious vibrancy are consistent drawcards," he says. "With this in mind, property in the City Bowl remains a steadfast investment for foreign buyers." Golding concurs. "Developments such as 16 on Bree allow for a live work play lifestyle that has become synonymous with "Indian and Russian investors are discovering that their rupees and roubles buy much more property here than in London or New York" Andrew Golding, CEO, Pam Golding Property Group global cities. The 36 storey mixed use residential development includes a creative workspace with formal meeting rooms and hot desks," he says. Other popular suburbs include Rondebosch, where international purchases have doubled, Observatory and Kenilworth, of which the latter has shown a steady increase in foreign investments since 2016. Respectively, they account for about 7%, 6% and 5% of all foreign transactions.
The demand in these suburbs is due to their good access to excellent schools, the University of Cape Town, historical sites, sporting facilities and other amenities. "Property values here have shown constant growth over the years," says Greeff Christie's International Real Estate CEO Mike Greeff.
The Western Seaboard including Table View is sought after too, thanks to its beaches, excellent schools, malls, its status as a top kitesurfing spot and good accessibility. "The MyCiTi bus service has dedicated traffic lanes which offer direct routes to the city centre, avoiding traffic congestion altogether," says Greeff. "This has also led to an influx of tourists." David Britz, sales and marketing director of developer Multi Spectrum Properties, says younger first time buyers are investing in this area because the entry level market in Observatory or Rondebosch is priced too high. Foreign buyers are also investing in Century City, Lightstone data reveals. Seeff Century City agent Helga Clemo confirms this. "Aside from its central location, Century City offers everything you need including schools and shopping malls," she says. "Many foreign buyers go after apartments ranging between R2.5m and R4.5m. It is also popular for rentals. We have seen high demand from buy to let investors, from European to African buyers." Lightstone data suggests that Cape Town's water situation has not deterred foreign homeowners. Greeff is in agreement. "The drought may have had cooling effects among foreign buyers in the first quarter of 2018. The postponement of Day Zero should put the concerns of foreign buyers to rest earlier than expected," he says.
In Johannesburg, foreign property demand is concentrated in Northcliff, Observatory, Parkhurst and Glenvista, and in Sandton's suburbs of Lonehill, Bryanston and Parkmore. Pam Golding Properties Gauteng regional executive Rupert Finnemore says Bryanston's tree lined streets and varied property types including clusters, sectional title units as well as executive apartments, have attracted foreign buyers. "This is because it is near the Sandton CBD, Fourways and Randburg. There are several public and private schools, shopping centres, eateries, Sandton Clinic and parks." Sought after units in the above suburbs include luxury three bedroom apartments ranging from R4.5m to R6m. "In clusters, prices start from about R3m and can go up to R8m for a four bedroom home," says Finnemore. Johannesburg's popularity isn't a surprise for some. "While the Cape has the allure of splendid surroundings with a desirable quality of safe living, hubs such as Sandton thrive in terms of industry and business," says Spence. "There is availability and affordability in the property market to suit many foreign investor pockets. For those wanting a high yield or broad property portfolio, the high rental returns can be attractive choices."
Author: Adrian Louw