South Africa may seem like a very distant destination but it has been as a popular location for real estate investment as it is for viewing the wildlife. Having spent time in South Africa it is no surprise that the country has been attractive for foreigners, but who has been actually doing the buying and investing? One group that seems to have the biggest interest are ‘high net worth individuals’ or those with net assets of $1 million USD. In a recent survey by Business Tech it reviewed which areas of the country were most desired by the affluent.
First in the ranking was Johannesburg, known for its range of businesses mainly in the financial services and is home to 44% of the nation’s millionaires. One area well known for the wealthy is Sandton with its very large homes and shopping areas. Second was Cape Town – The Mother City, which also has its financial services industry along with real estate, retail and tourism. Another area, the Garden Route, has become a major tourism and retirement zone located on the southern coast of South Africa. This area has seen a 26% rise in property ownership by South Africa millionaires since 2007 to 2015.
Cape Town and Beyond
Propstats & Lightstone and the Seeff property group report that five years ago only a few property sales were in the R20 million price range. Now as many as 22 of the country’s residential streets can claim that figure as an average sales price.
The data shows that the Cape property market is leading the rest of the country claiming 15 of the top 22 streets – nine on the Atlantic Seaboard (CliQon, Fresnaye and Bantry Bay) and six in the Southern Suburbs (Bishopscourt and ConstanLa). The remaining seven streets are in Johannesburg including the Sandton suburbs of Sandhurst, Hyde Park and Bryanston.
The report also states that, ‘Nettleton Road retains its position as the most expensive street in the country, located high up against the slopes of Lion’s Head, offering a combination of privacy and panoramic sea views. It now boasts an average sales price of R45 million (about R100,000/sqm plus) and a highest sales price of R111 million, sold by Lance Cohen in 2015. Properties in the street though range to as much as R150 million-R200 million at the top end.’ (Roughly USD $ 1 million = R14.5 million).
Outside of Cape Town, locations including Paarl, Franschoek and Stellenbosch are popular thanks to their mountains and well known vineyards. These areas were the fastest in property investment growth for millionaires up 38% between 2007 and 2015.
The most expensive street in Johannesburg is Coronation Road in the suburb of Sandhurst. With an average price of about R30 million for top end property and a top price of about R100 million.
Business Tech reports that Johannesburg has about 16,800 millionaires (2015) compared to Cape Town which has an estimated 7,000 (2015).
The Knight Frank Global House Price Index reported that the residential market performed relatively well in 2014. Their data indicated a price growth of ‘…8.3% in South Africa during 2014, which was around 3% in real terms, adjusting for inflation. Improved access to financing and relatively low interest rates have supported increased demand for residential property over the last two years, but interest rate rises are generally expected in 2015/16.’
Their research also showed: ‘The prime residential market has seen increased interest from foreign buyers, partly because the depreciation of the Rand has made prices more attractive to an international audience. Overseas buyers’ interest is primarily focused on Cape Town and the Western Cape, followed by Johannesburg.”
Almost 16.2% of properties bought by South Africans were for second homes. The FNB data was contained in the group’s April 2016 Property Barometer report, suggests that the buy-to-let home buying market is ‘stable’, which under the current economic circumstance is ‘not necessarily a bad thing’.
John Loos household and property sector strategist at FNB assessed the market by stating:
“One of the big attractions of buy-to-let buying for many is the expected capital growth that can be achieved, but house price growth generally remains benign at present. For those more focused on the rental income stream, there has been some yield “compression” since 2014 too, also reducing buy-to-let attractiveness mildly in recent years,”
GlobalPropertyGuide.com reports that property in South Africa is now ‘less expensive for foreign buyers than four years ago. Since July 2011 the Trade-Weighted Rand Index fell 47.8 percent to December 2015, according to First National Bank (FNB).
Foreigners can purchase ‘immovable property’ in South Africa with no restrictions. All foreign funds must be declared and their source(s) have to be verifiable along with the classification that the property is of’ non-resident’ declaration. Non-residents will have to pay a portion of the funds from the sale in Capital Gains Tax with the funds going to the South African Revenue Service.
By Kevin Murphy: www.kevinmurphy.london