Atlantic Seaboard luxury sector remains largely bullet-proof to property market fluctuations

Largely immune to the general slowdown in growth and sales in South Africa’s housing market the seemingly bullet-proof luxury segment of the Cape’s Atlantic Seaboard continues to achieve record sales and yield very solid returns for investors.

DESIGNER MASTERPIECE: This contemporary three-bedroom Fresnaye home with panoramic views over the Atlantic Ocean is an entertainer’s dream. A light and airy open plan living area with high ceilings flows out to a generous patio and pool deck and the Euro-styled kitchen allows for effortless catering. On the market for R17.995 million, it also offers a roof top terrace, staff accommodation,  solar geyser heating and two generous garages.

Notable was price movement over the eight-year period from the market peak in 2007 to 2015, when all the areas from Bakoven to Fresnaye achieved double digit annual price growth, says Brendan Miller, Atlantic Seaboard CEO for Lew Geffen Sotheby’s International Realty.

“During this period return on investment within the top five suburbs of Camps Bay, Clifton, Bantry Bay, Fresnaye and Bakoven sustained double digits even throughout the international and national credit crunch, which had minimal impact on these constantly sought after locations.

“The perennial appeal is mainly due to the high demand to live on the highest-priced strip of land in South Africa, where buyers are prepared to pay premium prices for their luxury slice of the action.”

Miller says the numbers are emphatic and speak for themselves. For houses, during the six years through to the third quarter in 2015 the average return on investment was a nominal and impressive 22% per annum. If calculated over the eight year period to 2014 the rate was 19%, or alternatively for the eight years to 2015 this stands at 17%.

“If we dig further into the latest figures from Lightstone and the Deeds Office they show brilliant, inflation-beating returns during 2015. Houses below R10 million achieved a nominal return of 15% per annum over 11 years while those between R10 million and R20 million achieved 18% over seven years and above R20 million a rate of 19 percent over seven years.

“Individually, in the house category the top five suburbs performed exceptionally well especially in the mainstream luxury price class from R10 million to R20 million with Fresnaye at an impressive 23% over seven years, Bakoven at 18% over eight years, Clifton at 18% over nine years, Camps Bay at 17% over eight years and Bantry Bay at 17% over seven years.”

The highest price paid for a property on the Atlantic Seaboard during 2015 was R111m for an opulent house in Nettleton Road in Clifton, the most expensive road in South Africa. This property showed a phenomenal nominal percentage % ROI of 29% per annum over eight years.

Apartment properties within the top five areas on the Atlantic Seaboard also achieved very favourable returns, reflecting on average a distinguished 19% nominal rate per annum over the past six years. Broken down by area and over the past six years these were Bakoven at 22%, Camps Bay at 21% and Bantry Bay at 18%, Clifton at 16% over eight years and Fresnaye 21% over five years.

Says Miller: “For any investor, whether buying to stay or making a pure investment acquisition, this is good news in terms of excellent capital growth on your initial investment, plus the potential for outstanding rental returns.

“From the start of 2014 to date, of interest is that while the ratio of apartments to houses was almost evenly spread at 47% : 53% of a total of 608 sales, the total value of house transactions was more than double, amounting to R2.064 billion for apartments and R4.359 billion for house sales.”

The ratio is also area-dependent, although apartment sales fared well in Camps Bay the majority of sales in this suburb hinged on the house market, whereas Bantry Bay and Clifton enjoyed more apartment sales.

Miller says the luxury housing market from R10m to R20m has accelerated in recent years. While in 2007 only 31 properties sold to the combined value of R433.76m, by the end of 2014 total sales increased by a whopping 129% representing 71 sales. In other words, the Rand value of sales from R10 million to R20 million increased to R965.880 million, almost by R1 billion in just seven years.

During the same period, property sales above R20 million increased by 292 percent in rand value from R208.087 million to R816.83 million, while the number of units rose by 237 percent from eight to 27 sales.

“Buyers may have improved their homes with additional accommodation or simply kept them well-maintained – either way the quest to stay on the Atlantic Seaboard will always remain a priority whether good times or bad.”

Observes Lew Geffen, Chairman of Lew Geffen Sothebys International: “Other than its idyllic and convenient location and excellent return on investment, a factor which has contributed to the strength of the Atlantic Seaboard market is the continued influx of upcountry buyers who are settling in the Cape.

“The property market along this world-acclaimed coastline is resilient and for the most part defies the impacts of a subdued economy. The only effect we have seen is that some properties remain on the market slightly longer, but this is largely due to sellers holding out for their price.

“Favoured by the affluent, the majority of buyers in the Atlantic Seaboard luxury market are still cash-flush, with 61% all house sales within these top are composed of cash transactions.”

Adds Geffen: “And foreign investment in the area is by no means decreasing as the weakness of the currency makes investment in luxury property in South Africa an extremely viable and attractive proposition for those with pounds, dollars or euros.

“Their preference is for the higher-priced properties in prime position and with the best possible views. In the areas of Bantry Bay, Camps Bay, Clifton and Fresnaye, buyers from Europe and the UK have proven the most avid investors.

“Notably after the FIFA World Cup and according to Lightstone statistics overall sales figures since 2010 show that in rand value 74% of all foreign transactions in these premium suburbs were for homes fetching prices in excess of R10 million. This is the equivalent of R1.823 billion of the total foreign sales of R2.458 billion. In units sold, 97 or 47% of the total of 205 foreign sales were above R10 million.”

Looking at the year ahead Geffen says the top Atlantic Seaboard suburbs will continue to perform well with the uptick in the luxury market from R10 million to R20 million experienced during 2015 a clear indication that this is still one of the top destinations not only in South Africa but internationally.

“It proves that buyers are still prepared to pay a premium for top-end lifestyle properties with excellent proximity to world class amenities such as the V&A Waterfront and unmatched beaches of the calibre of Clifton and Camps Bay.

“Apartment living on the Atlantic Seaboard will always be an attractive option, particularly for investors upcountry or abroad.

“Developers have been very active within the top five suburbs, which all have projects under construction for completion in 2016, providing fresh opportunities for investment.”

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