In this feature we review the top hotspots for foreign buyers in South Africa. Specifically, we look at who is buying, why they are buying, which suburbs they are buying into and the types of properties they are purchasing.
Before we start it is important to consider the history of property in SA. Prior to 2000, South African property prices were well below worldwide norms and a correction occurred with prices rising by almost three times in US dollar terms during the seven-year period between 2000 and 2007. Many new ‘property millionaires’ were created during this period, particularly in Cape Town.
This rise was initially fuelled by increased foreign buyers, particularly in the Cape luxury market. Much of this investment was focused in Cape Town’s big 5 luxury hotspots: Fresnaye, Bantry Bay, Llandudno, Clifton and Camps Bay. The rise in prices in these areas then filtered through to the rest of the country.
Since 2007, the SA property market has performed more moderately, declining by just over 10% in US dollar terms. According to wealth consultancy New World Wealth, prime properties in Cape Town (Clifton, Bantry Bay) now cost an average of US$6 500 per square metre. Although this may seem high, it is still well below the likes of London (US$40,000), New York (US$30,000) and Sydney (US$22,000).
This disparity creates an ongoing demand, particularly from English speaking buyers who are looking for a second home in an international city. Perhaps most notably, in March 2014, Knight Frank rated Cape Town as the best priced international city in the world for UHNWIs (individuals with over US$30 million in net assets) in their 2014 Wealth Report.
The following table gives an indication of the origin of buyers of prime South African property in 2007 and 2013 and projections for 2017. As reflected, wealthy UK citizens made up the largest foreign share of the market in 2013, although their share has fallen between 2007 and 2013.
The most interesting trend has been the large rise in the number of buyers from the rest of Africa, which rose from 7% of foreign buyers in 2007 to 19% in 2013. This figure is expected to reach 30% by 2017.
African buyers have been particularly interested in the Sandton area, as many of them are keen to have a second residence in the economic capital of Africa for business purposes.
UK and EU buyers on the other hand have been far more interested in holiday homes. Up until 2007, most of these buyers focused on the big 5 luxury hotspots in Cape Town. However, over the past few years they have started to buy up estate properties particularly in the Stellenbosch and the Garden Route area (Knysna, Hermanus, Wilderness, Plettenberg Bay). Ballito and Umhlanga on the east coast are also on their list, as are lesser known Cape areas such as Blouberg, Greyton and Franschhoek.
Specifically, estate properties such as Pearl Valley, Zimbali, Fancourt, Pezula, Pinnacle Point, Arabella, Simola, de Zalze, Steenberg, Erinvale, Simbithi and Brackenridge have all featured prominently for these buyers over the past 5 years.
Wildlife estates have also proved popular, particularly those around Kruger Park. Examples of major wildlife estates in SA include: Raptor’s View, Shandon Estate, Hopewell Conservation Estate, Intaba Ridge, Gondwana and Royalston.
Most recently, new signature lifestyle estates such as Val de Vie in Paarl are attracting strong interest. According to Lisa Bathurst, MD at Hurst & Wills: “Val de Vie’s latest development, the Polo village, features residences, offices and ‘polo pads’ designed by Stefan Antoni. The whole estate is something to watch right now, with their association to polo and brands like ‘Bentley' on board, it is attracting some serious international interest. It is particularly interesting that this was the first SA wine estate that China have gotten involved with too.”
Going forward, these types of properties are expected to continue to dominate and most analysts expect foreigners to continue to pour into SA. After all, South Africa offers great value for money, top shopping centres, spectacular wildlife, great beaches and high quality food and healthcare. Perhaps most notably, South Africa is a great escape for North Hemisphere buyers during their winter months.
For the common UHNWI, the combination of place in London and a beach pad in Clifton can be difficult to resist. For the less wealthy, an estate property in Stellenbosch will have to do.
Written by Andrew Amoils for Property24
Andrew is the head of research at New World Wealth, a wealth intelligence company based in Johannesburg. He previously co-founded and headed up the reports team at Wealthinsight in London. He can be contacted on firstname.lastname@example.org