Foreign buyers lead at the top end
● Seeff Properties, one of SA’s largest estate agency groups, says more foreign buyers are snapping up luxury properties than locals, who are more cautious about the country’s economic prospects.
However, estate agencies report that the number of sales of high-end properties is still sharply down compared to a few years ago, as local buyers, who still outnumber foreign buyers, are spending less on property.
Seeff Properties chair Samuel Seeff said this week that SA’s high-end buyers “continue reflecting the decline in confidence which has been evident since 2017”.
“They are simply not prepared to invest more into the property market until they see GDP growth and demonstrable action on corruption and the state-owned enterprises. When they do buy, they are spending much less on real estate, possibly choosing to shift the remainder into offshore assets.”
But foreign buyers are optimistic.
Seeff Properties says foreign buyers — predominantly from the US, United Arab Emirates (UAE), Germany and the UK — are showing significantly more confidence in the upper R20m-plus end of the real estate market than South Africans. It also reports interest from Zimbabwean and Malawian buyers.
Seeff says foreign buyers find the “value proposition in SA outstanding” taking into consideration SA’s strong legal, banking, property ownership and infrastructure systems. The “best value to be had is at the very top end of the market” where prices in the R20m-plus sector have not moved since 2016/17, he adds.
“That means that you are effectively finding properties, many of which are new listings not seen before, at prices which are 20%-30% below what they would have been in a growing economy. If you combine that with what your dollars, pounds or euros can buy you in SA, it is a significant value proposition,
not just for foreign buyers but also a lost opportunity for SA’s wealthy buyers.” Erwin Rode, CEO of Rode & Associates, says “there is no doubt” prices in the upper end of the market have “come down more than the rest”. His view is that sellers in the top end are those who are “more footloose, read newspapers and become more depressed about the country than the ordinary souls who are salaried.
“It’s quite possible then that it’s a question of bargain hunting by foreigners, if that is the case, but I can’t confirm this.”
Seeff says foreigners mostly favour coastal areas such as Cape Town’s Atlantic Seaboard/City Bowl and Plettenberg Bay. “Atlantic Seaboard/City Bowl sales to foreign buyers over the last year are a whopping 36% higher compared to 2019 and the highest that it has been over the last three years.”
He says almost a third of all high-value properties fetching more than R20m across the Atlantic Seaboard have been sold to foreign buyers who have paid five of the highest prices in the country, ranging from R30mR70m. The group’s biggest transactions include
a R45m sale at the Waterfront last weekend to a German buyer — the highest price achieved there since 2013, Seeff says.
Seeff Properties recently sold a Fresnaye property for R36m to a buyer from Dubai in the UAE and is concluding a sale in Plettenberg Bay that “will be the highest price achieved over the last few years”.
The company recently sold two properties for more than R20m in Constantia Upper to buyers from Zimbabwe and Malawi.
But Seeff says in general the market above R20m is still down about 60% since 2017 in terms of sales, even with the higher volume of sales to foreign buyers.
“Despite the better than expected activity” there were only 21 sales above R20m over the last year versus 65 three years ago. “Where prices of up to R100m to as much as R290m were reached up to 2017, the highest price reached over the last two to three years is around R75m,” Seeff says.
Other large estate agency groups report increasing interest in SA’s top-end market by foreigners, but say it is still dominated by local buyers.
Lew Geffen Sotheby’s International Realty says there are opportunities for locals and foreigners, with prices in the top end having come down between 10% and 20%.
Chris Cilliers, CEO and co-principal of Lew Geffen Sotheby’s International Realty in the Winelands, says the group has “definitely started” to see more activity and enquiries from potential foreign buyers, particularly regarding “agricultural properties with luxury homesteads”. But she says the travel ban to SA is making it “very difficult” for international buyers to commit, and until the country is taken off the “red list” and more flights are available, it will “continue to be an issue in terms of international buyers”.
Because of the travel restrictions, foreigners remain a “small proportion of our buyers” in the top end, Cilliers says.
However, the group has experienced an uptick in local buyers recently as they realise “there is possibly a window of opportunity to buy currently with price stabilisation and low interest rates”.
Joanna Thomas, area specialist in Constantia for Lew Geffen Sotheby’s International Realty, also reports “good activity” from foreign buyers.
“We have been receiving many overseas enquiries — often the interested parties are asking family members, friends, to view and even carry out FaceTime or video tours. We have made numerous sales to overseas buyers in recent months and we continue to have many waiting to come to SA ready to purchase.”
But Thomas says her agency has also seen a lot of “local activity”.
Steve Neufeld, manager principal for the group in Plettenberg Bay, says on average international buyers have made up about 7% of the overall market in Plettenberg Bay, but this had declined to around 4% “for the obvious reason 1of travel restrictions due to Covid-19”.
“We expect there to be an increase again once the virus is under control,” he adds.
Andrew Golding, CEO of Pam Golding Property Group, says there has been a “noticeable
uptick in activity at the top end of the market” and “positive signs of recovery” with recent sales to locals and foreigners.
“In recent months, including the December festive season, we have successfully concluded sales on the Cape’s Atlantic Seaboard and in Johannesburg’s northern suburbs at prices from R20m to in excess of R30m and even up to R70m. Buyers are a mix of local and international purchasers.”
Golding says the group recently sold several homes in the R20m-R30m price band in Sandhurst and Hyde Park, including a penthouse apartment in The Houghton for R20m.
“Half of these recent acquisitions were by locals, with the balance to foreign buyers predominantly from the rest of the African continent.”
Golding says the group recently sold a luxury Clifton bungalow on 4th Beach for R70m to an upcountry buyer for use as a holiday home — “the second highest price for a residential property on the Atlantic Seaboard this year”. This follows the group’s sale of another Clifton house for R37m to a buyer from Dubai in December.
The highest price achieved for a penthouse for the Pam Golding Group in the past 12 months was the sale of an apartment for R41.4m in The Marina at Cape Town’s V&A Waterfront.
But Golding says SA’s luxury residential market, which spans values from about R10m-R100m and beyond in rare cases, remains a “predominantly local market, with foreign buyers comprising less than 1% of total sales in any given time period”.