Foreign buyers hedge their bets on Cape Town, buying activity spikes by 50%

It is an interesting Article from Seeff due to the timing of it.  At a time of increasing aversion to the perceived risks of emerging markets (equities and bonds) that it is accompanied by increased property investment in this little emerging economy of ours.

The Rand has taken an absolute hammering against foreign currencies since the statistical period referred to in this article, which presents foreign buyers with even better bargains.  If the Rand remains weak, it will be interesting what the statistics for 2014 reveal.

It's a great time for foreigners to buy in SA.

Gareth Shepperson
Commercial and Property Attorney

Foreign buyers hedge their bets on Cape Town, buying activity spikes by 50%

There has been a notable increase in foreign visitor numbers to the Cape this summer, and property has also seen a significant spike in business.

A view of Cape Town with the V&A Waterfront in the foreground..

'For the first time in years, we have, over the past year seen about a 50% hike in foreign buying activity in these seaside areas compared to 2011/12," says Ian Slot of Seeff. Most of these sales were cash, bringing direct foreign investment, tax revenues and job growth into the country.'

That foreign buyers are showing confidence in our property market is evident from the sales data, says Slot. During the 2013-year, about 187 properties worth almost R1,725 billion sold to foreigners; about 29% of all buying activity in these two areas. This represents an increase of about 50% in sales volumes and about 120% in Rand-value when compared to the 2011/12 period when just over 120 properties worth almost R800 million (representing about 20% of all sales) sold to foreign buyers.

The majority of sales activity falls below the R10 million price mark as foreigners look for good value. Having said this, Slot notes that around 12 properties priced above the R20 million price mark sold to foreigners, most notably to African buyers who snapped up 5 properties priced between R20 million and R30 million, especially in Camps Bay, Bantry Bay and at the V&A Waterfront. This illustrates the confidence of the rest of the continent in our property market and with an overall shift in increased buying from Africa and the eastern markets continuing.

In terms of sales above the R20-million mark, the highest recorded sale to a foreign buyer was in Clifton where 3 properties, priced between R24 million and R50 million sold; the latter being the highest price and sold to an Irish buyer. Three properties sold in Camps Bay, two of which were to African buyers; a R20 million villa that sold to a Congolese buyer and a home priced at R30 million that sold to an Angolan. In Bantry Bay, a Nigerian buyer paid R30 million for a home while a buyer from Barbados forked out R34,5 million. Noteworthy too, two high value apartments at the V&A Waterfront sold; a R25 million apartment to a Nigerian buyer and a R52,5 million apartment to a Swiss buyer.

The traditional source market regions - being the UK and Europe - continue to invest and more European countries such as France are buying. A shift to buyers from Africa and the East is however, now borne out by the sales data, says Slot. Countries such as Nigeria, the UAE (United Arab Emirates) and, from the Far East especially Chinese buyers all show a significant year-on-year increase in buying activity. Significantly, there has also been an increase from USA buyers.

While the UK and Europe remains the largest contingent, the overall percentage has shifted from over 60% of foreign buying in years gone by to around 40% for the past two years, continues Slot. There has though been a noteworthy increase in buyers from Germany, the Netherlands and France along with buyers from Belgium and Switzerland. Germans have bought 22 properties, up from 14 in 2011/2. Dutch sales increased to 7 properties compared to 3 sales while French buyers invested in 11 properties compared to 9 in 2011/2.

One of the biggest jumps came from the USA with buyers snapping up 12 properties last year compared to just 3 during the 2011/12-period.

African buyers now account for about 20% of all sales to foreign buyers, says Slot. Sales to Nigerians have more than doubled with 8 sales compared to just two in 2011/2. A noteworthy development is South African tourism announcing that it is opening its first regional office in Lagos, Nigeria to serve the Nigerian and Ghanaian market, a development, Slot says, that will surely draw increasing visitors and buyers from these growth markets. On the SADC front, we note an increase in buying activity from Zimbabwean nationals with 4 sales in 2013 compared to 2 in the preceding year.

Middle and Far Eastern buyers now account for over 13% percent, more than double the 6,4% of 2011/2 year, continues Slot. Buying by UAE nationals in particular has increased to 7 sales, up from 2 in the preceding year. Sales to Chinese nationals have quadrupled to 8 properties compared to just 2 in 2011/2. Indian buyers have invested in 3 properties compared to none during the 2011/2-year.

While there has been a good spread of buying across the suburbs, Slot says, there are a few stand-out areas. Camps Bay tops the list with 33 sales compared to 25 in the 2011/2 year while buying in the suburbs of Clifton, Bantry Bay and Fresnaye has remained much the same over the past two years. Buying in Sea Point, mostly apartments, is up slightly to 22 sales compared to the previous year's 19 sales. There has however been a notable uptick in buying activity in Green Point with 20 sales last year compared to 13 sales in the year before.

A key trend has been the significant increase in apartment sales in the CBD to foreign buyers, adds Slot. About 19 apartments sold compared to 9 in the preceding year. While one apartment sold to a Nigerian buyer, most sold to UK and European buyers.

Sales of foreign-owned properties have remained fairly constant at about 14% (around 166 properties worth R500-R600 million) of all sales activity in these two areas over the past two or so years, adds Slot. This generally leaves us with a net-foreigner buyer effect of about 5%, a negligible outflow. Yet, he continues, when we look at the inflow and particularly at the additional inflow during the past year, this is direct foreign revenue and a vital contribution of tax revenues and jobs for South Africans.

Seeff Press Release


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