CAPE TOWN – Property purchases by foreigners have slightly recovered from their recent low in the fourth quarter of last year, but remained largely subdued, accounting for 3.7 percent of the domestic market.
The FNB estate agents' survey yesterday showed foreigners played a less prominent role in the Cape Town market this year, choosing instead other cities and extending the steady decline since the end of 2014.
FNB economist Siphamandla Mkhwanazi said net foreign demand was expected to drag property prices until perceptions about South Africa improve materially. “In our view, this requires substantially higher growth domestic product (GDP) growth and tighter labour markets,” he said.
Expats appear to be migrating to Durban and Port Elizabeth.
“Data reveals African continent foreigners are largely behind the recent uptick in foreign demand, now accounting for about a quarter of all foreigner demand,” said Mkhwanazi.
However, due to the faster rate of property coming on to the market from emigration-related sales, net foreign demand was around 9percent lower in domestic volumes in the second quarter of 2019, “which local buyers must fill to keep the market supply-demand balance constant.”
“The improvement in foreigner purchases suggests that foreigners looked through the elections-related noise and took advantage of the currently attractive prices and the favourable conditions of trade (high negotiating power),” said Mkhwanazi.
Pam Golding chief executive Dr Andrew Golding said the property market had started to cool about two years ago, due to factors such as low GDP growth, political uncertainty, the re-emergence of land issues, cyclical factors in the property market and the water crisis in the Cape, but post-election, and the resultant improving sentiment, would improve the market.
“We have seen a number of property cycles governed by crises,” he said.
Ross Levin, MD for Seeff Atlantic Seaboard, Waterfront and City Bowl, said that while property sales were down in what had traditionally been a favoured property buying area of the country for foreign buyers, business still continued on a daily basis.
“Regardless of the state of the economy, there is opportunity in every market as demonstrated by the shift to the lower price bands,” Levin said.
”While the super wealthy and foreign buyers have taken some time out from the swanky Atlantic Seaboard market, locals are using the opportunity to snap up property in the lower price categories.
"There has been strong demand for property below R5million, predominantly apartments, accelerating slightly over the last two months.”
Almost R1billion of this year’s sales for the Atlantic Seaboard and City Bowl fell under the R5m price mark.
In contrast, sales above R15m on the Atlantic Seaboard and R10m in the City Bowl remained slow.
“Only 29 deals had been recorded above this level for the Atlantic Seaboard, with only 18 of those above R20m. Just three of the top-end (R20m-plus) sales were to foreign buyers and only three of the highest prices paid have been to non-Cape buyers,” Levine said.
Sectional title sales dominated the market, accounting for well over 75 percent of all units sold and more than 55 percent of the value generated in the market this year.
The highest prices achieved on the Atlantic Seaboard include R60m for a house in Fresnaye, R58.5m for an apartment in Bantry Bay and R45m for a house in Clifton.
This was nowhere near the levels of two to three years ago when sales of R100m to R290m were concluded.