A magnet for world's investors

PUBLISHED : Wednesday, 20 June, 2012, 12:00am
UPDATED : Wednesday, 20 June, 2012, 12:00am


As in so many countries, South Africa's property market has been an unpredictable roller coaster of late. Although the country itself managed to avoid recession, it remained highly exposed to global economic events. Prices went up sharply in early 2010, only to dip as economic growth slowed.

The recent picture has been what the Global Property Guide surmises to be 'two quietish years' for property in South Africa. It says residential prices have been static in nominal terms during the past year (second quarter of last year to the first quarter this year), but have fallen in inflation-adjusted terms by minus 5.85 per cent.

Latest reports indicate a market on the up again - fuelled, largely, by foreign investors. Matthew Montagu-Pollock, publisher of the Global Property Guide, says they're being spurred by favourable currency conditions.

'In November 2010, South Africa's bank rate was reduced to a very low 5.50 per cent, with the prime lending rate at 9 per cent. This helped push the South African rand significantly down against major currencies from the beginning of 2011. So now, it is no surprise that South African property is becoming more attractive to international buyers,' he says.

Agents agree. Lanice Steward, managing director of Anne Porter Knight Frank, the Cape Peninsula estate agency, quotes FNB Property Barometer figures to support this.

She says that in mid-2011, foreign buyers accounted for only 2 per cent of the total South African residential property buyers, but by the first quarter of this year, the figure had risen to 4 per cent.

These sales figures have to be seen in their context, she says. 'They are as yet still a long way off the 2005 figure of 7 per cent and the late 2008 figure of 6.5 per cent - but they do indicate that both international and foreign buyers have confidence in the South African market.

'They recognise that it offers good value and appreciate the fact that compared to many African countries, the regulations and taxes governing South African property ownership by foreigners are equitable and not too onerous or complicated.'

The confidence of foreign buyers, Steward adds, is also still evident among South African expatriates. In the past two quarters, their share of the total buying figure has risen from 2 to 4 per cent.

Lew Geffen, chairman of Sotheby's International Realty in South Africa, says real estate there is appealing because it represents a relatively stable investment platform. Especially in comparison to Europe, he says South Africa has managed to insulate its markets fairly well against the effects of the recession due to a sound macroeconomic policy and its success in deterring national debt.

'This, coupled with a steadily growing local market and predictions of a possible property boom in the next five years, make buying property in South Africa a sensible decision.'

Most of these overseas buyers do not hail from the traditional sources of England and Germany, but rather South America, Eastern Europe, other African countries, India and China, Geffen notes.

'As a member of the BRICS [Brazil, Russia, India, China and South Africa] grouping, South Africa is already acknowledged as one of the most important developing countries in the world, which is expected to exhibit twice as much economic growth as developed countries over the next 15 years.

'This makes it attractive to investors from developed countries but, at the same time, as the World Bank recently noted, companies and investors in the emerging markets themselves are playing a huge role in reshaping the global economy.

'And especially notable is the increase in South-South trade and investment - between South Africa and fellow BRICS members Brazil and India, for example.

'What is more, Africa with its wealth of commodities has gone from being the poorest region in the world 10 years ago to the second-fastest-growing region in the world and, this year, the International Monetary Fund predicts it will show economic growth of about 6 per cent, the same as Asia. In the wake of this, South Africa is not only increasingly seen by overseas investors as the gateway to the huge African market, but is also benefiting from stronger ties with other African countries and the interest of the growing number of newly-wealthy African entrepreneurs.'

Geffen says Sotheby's International Realty has noted a slow but steady rise in the number of foreign entrepreneurs and executives taking up residence in South Africa in the past two years.

The properties they favour range from upmarket cluster homes in small complexes, to gated estates and right through to grand mansions 'as long as the estate has excellent security'.

Geffen adds: 'Proximity to an international airport and a major business or export centre will also be key, which points to an expansion of foreign investment beyond Cape Town.'

Rooms with views

This modern, architect-designed home (above) by Aurelio Cimato, perched on the Linksfield Ridge, Johannesburg, has panoramic views to the horizon. It features three en-suite bedrooms plus guest suite, two studies and a library, three living zones, fireside dining room, and a state-of-the-art kitchen with Smeg appliances, separate scullery and laundry, walk-in pantry and walk-in fridge/cold room. Outdoor living is offered on a covered patio with BBQ, timber deck and heated rim-flow pool. Outbuildings include seven garages, a storeroom, staff quarters and guard house with a comprehensive security system.

For sale, fully furnished, at US$3.6million by Charlene Liebman (charlenel@sothebysrealty.co.za).