High End Properties in uMhlanga: A Value Proposition?

Poor economic fundamentals in South Africa are starkly juxtaposed with a residential property market which, in select areas, continues to reach new heights. What at first sight seems a major contradiction, distortion even, may be the clever ‘Mr Market’ at work. (Mr Market is an allegory created by US investor Benjamin Graham in an effort to explain market behaviour).

Only 10 minutes from uMhlanga, Ballito and King Shaka International Airport, this magnificent 550sqm, four bedroom (three en suite) Balinese-style home in eMdloti has spectacular ocean views and is priced at R16.5 million through Pam Golding Properties.
“The truth is,” as Elwyn Schenk, area principal of Pam Golding Properties uMhlanga points out, “the savvy investor is currently seeing excellent value in residential property in South Africa, with the weak rand adding further to the appeal for international investors.”
He says after the global financial contagion of 2007-2009, world markets reacted in various ways, with several major themes emerging:
-          Quantitative easing (QE) with billions of dollars (three trillion and counting) pumped into the system to keep the major economies afloat and recapitalise the banking system. This has served to inflate financial assets with world stock markets near record highs.

-          The ‘new normal’ brought with it a lower interest rate regime, negative in some countries (in fact the European Central Bank (ECB) has reduced its deposit rate to a negative 0.10 percent ie banks have to pay to deposit their money with the ECB). Astute investors have geared their purchases accordingly.

-          A flight to hard assets such as artworks, antiques and notably, property (gold being something of an anomaly). Says Schenk: “For many investors, the case for tangible assets is now even clearer as we are faced with potential hyper-inflationary scenarios globally. The smart money, which tends to lead the market, euphemistically Mr Market, cautious about excess cash in the system and nervous about potentially overheated stock markets, is turning to the ultimate hard asset - property.”

As usual, London seems to be leading the field in property investment with prices increasing by 19 percent in the last year, to an average of GBP 514 000 (approximately R9.3 million). Savills, a leading UK property group and associate of Pam Golding Properties, says that booming property values have exceeded all expectations over the 12 months.

A fully furnished, newly decorated luxury penthouse apartment in a sought after complex with ocean views and within walking distance of the beach and uMhlanga Village is marketed by Pam Golding Properties at R6.9 million. Approximately 335sqm in size, the apartment includes three bedrooms (main en suite), two bathrooms and two reception rooms.
By way of example Savills are currently advertising (Financial Times, 5th October 2014) a five bedroom apartment in Chelsea for GBP 6.495 million (R115 million approximately.) A similar sized apartment in One Hyde Park (Knightsbridge) is priced at GBP 64 million (R1.15 billion). In Barbados a five bedroom beachfront villa will set you back USD12 million (R135 million).
Says Schenk: “By comparison, prices for upmarket South African homes are extremely low; much more so for the hard currency foreign buyer. In dollar, euro and sterling terms, South African house prices dropped by an average of 19.7 percent, 23 percent and 24.6 percent respectively over the past three years. This explains the increased interest from potential purchasers in the UK and Europe primarily for properties on the Atlantic Seaboard and the North Coast of KwaZulu-Natal.
“This, and factors like relatively low interest rates and increased mortgage lending by the banks has led to a strong surge in sales, such that we are back to pre-crisis levels last seen in late 2007. Pam Golding Properties achieved a substantial 52 percent annualised increase in sales in the R10 million to R20 million bracket in the financial year to end February 2014, and a 21 percent increase in total group turnover for the period.
“In my view particular value is to be had in the uMhlanga, eMdloti coastal strip, especially given its virtually all year round summer and secure, easy lifestyle.”

Priced at R16.8 million through Pam Golding Properties, this brand new 800sqm, five bedroom (all en suite) home in Hawaan Forest Estate in uMhlanga has sea views, state of the art imported finishes, easy indoor-outdoor flow onto large deck with infinity pool, fully-equipped movie room and Jacuzzi.
Schenk says excellent examples in uMhlanga are:
-          A 800sqm brand new house in an eco-estate with state of the art imported finishes on the market for R16.8 million (GBP 930 000 , USD 1.5 million)

-          A similarly priced home in eMdloti, in a classic Balinese style with beautiful ocean views, 550sqm under roof and an entertainer’s dream.

-          A six bedroom, all en-suite, colonial style home high on Bellamont Road, eMdloti, with 180 degree sea views and priced at R16.9 million (GBP 938 000, USD 1.5million)

-          A beachfront apartment (in Umhlanga Bay), 335sqm in size and priced at R6.9 million (GBP 380 000, USD 610 000).

“In addition, Pam Golding Properties uMhlanga has on the drawing board several developments - including free standing homes and apartments, situated high on the hill in Izinga gated estate, in the price range from R3.5 million to R22 million. Despite an acute shortage of stock there has been a strong surge in sales in the uMhlanga/ La Lucia /eMdloti area with Lightstone reflecting average turnover of R258 million per month for the region. While the focus has been on the R1 million to R5 million price bracket, good opportunities lie in the upper sector, where prices remain competitive. Demand continues unabated.
“Little wonder that in a recent publication Dr Andrew Golding, CE of the Pam Golding Property group said, “even taking into consideration political and economic variables, South Africa is a very good prospect for investors, both local and foreign”. This is why it’s worth investing right here at home,” says Schenk.
It seems once again, Mr Market is on the money calling a ‘buy’ signal for local property.

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