Where are the wealthy property investors buying?

May 19, 2016

Prime residential real estate continues to be immensely attractive for the world’s wealthiest individuals.

According to the latest issue of Luxury Defined 2016, the just-released annual study from Christie's International Real Estate, global luxury property markets recorded an 8% annual increase in home sales at US$1 million or above in 2015.

The world’s “hottest” city for luxury real estate - based on Christie’s survey of 100 markets in which their affiliates operate - is Auckland, New Zealand, which posted 63% growth in US$1 million-plus sales thanks to strong international and local demand.

The previous year’s top-ranking market, Toronto, continues to thrive, and saw 48% growth in year-on-year luxury home sales, as well as a shrinking number of days on the market.

“South Africa - and in particular Cape Town - is seen as a unique opportunity market for investors, particularly those with pound sterling, as Cape Town property is approximately 19% less expensive on average for buyers with this currency,” says Mike Greeff, CEO of Greeff Properties, Christie’s International Real Estate.

“Exchange-rate movements continue to influence prime property value propositions worldwide.”

Greeff says shifts in international wealth over the past 12 to 24 months have prompted many high-net-worth Individuals (HNWIs) to seek opportunities to acquire second homes and luxury investment properties in otherwise healthy property markets that have been impacted by exchange rate declines

What the Luxury Defined report revealed about South Africa

The South African rand struggled in 2015, depreciating 23% against the US dollar, although it began to stabilise in the first quarter of 2016.

According to the report, global economic uncertainty took its toll on the country’s economy as well. However, as the continent’s most industrialised nation, and as one of the region’s cultural hubs, South Africa offers enticing real estate opportunities.

The combination of a favourable exchange rate and a shortage of inventory has driven home prices up 25% to 30%. Even with these increases, the weak rand still makes South African luxury property an appealing value proposition for overseas investors.

“The standard of real estate available at these prices globally is incomparable to what Cape Town offers by way of accommodation, size, and way of life. Luxury properties, especially waterfront Cape Town homes, offer enduring value to international buyers - in particular northern hemisphere,” says Greeff.

“Locally, the rand still has significantly greater value than it does beyond our borders, so luxury homes are available at well under the equivalent of US$1 million.”

He says in many areas of the peninsula, properties priced from R10 million fall into the luxury market category, and in Cape Town, this market sector shows no signs of slowing down.

“The Atlantic Seaboard generates the most sales revenue with a total of R2 918 409 075 recorded by Propstats from 1 April 2015 to May 2016. This was 12% higher than the R2 603 607 200 generated in the period during April 2014 to April 201,” says Greeff.

“Year-on-year figures for the Southern Suburbs indicate a 27% growth in sales revenue rising from R595 830 000 to R758 150 000.”

He says Constantiaberg sales revenue totaled R706.955 million for the period 1 April  2015 to May 2016, exhibiting a 37.6 % growth from R513 852 480.

“The highest growth percentage, according to Propstats, was for sales revenue generated in the City Bowl. This more than doubled from the R213.04 million reported for the period April 2014 to April 2015 to R 578.48 million reported for the period 1 April 2015 to May 2016.”

He says in False Bay, total sales revenue  grew by 48% from R37 million for the period of April 2014 to April 2015, to R55 million for the period 1 April  2015 to May 2016.

“This solid trend of growth in the luxury real estate sector - both internationally and locally - is significant, and is echoed in the Luxury Defined report as a prevailing sentiment across the board in the Christie’s Real Estate network of affiliates, that HNWIs are likely to continue to invest in property because it can weather changing economic cycles, creating long-term value and superior risk-adjusted returns,” says Greeff.

He says real estate across the board in all sectors of the Cape market appears to be a topping the list for buyers, and April has been a record month for Greeff, with a total revenue of R211 million.
“This is a considerable chunk of real estate, and indicates that current buyers are serious and - most importantly - qualified,” says Greeff.




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