Global and local growth in luxury real estate

Prime residential real estate continues to be immensely attractive for the world’s richest people.

According to the latest issue of Luxury Defined 2016 – the just-released annual study from Christie’s International Real Estate – global luxury property markets recorded an eight percent annual increase in home sales at US$1 million or above in 2015.

The world’s “hottest” city for luxury property based on Christie’s survey of 100 markets in which their affiliates operate, is Auckland, New Zealand, which posted 63 percent growth in US million-dollar-plus sales thanks to strong international and local demand.

The previous year’s top-ranking market, Toronto, continues to thrive and grew by 48 percent year-on-year in luxury home sales as well as a shrinking number of days on the market.

“South Africa and in particular Cape Town is seen as an excellent opportunity market for investors, particularly those with pounds, as Cape Town property is about 19 percent less expensive on average for buyers with this currency,”  says Mike Greeff, chief executive of Greeff Properties, Christie’s International Real Estate.

“Exchange rate movements continue to influence prime property value propositions worldwide. Shifts in international wealth over the past 12 to 24 months have prompted many wealthy individuals to look for opportunities to buy second homes and luxury investment properties in otherwise healthy property markets that have been affected by exchange rate declines.”

According to the Luxury Defined report the South African rand struggled in 2015, depreciating 23 percent against the US dollar, although it began to stabilise in the first quarter of 2016.

“Global economic uncertainty took its toll on the country’s economy as well. However, as the continent’s most industrialised nation, and as one of the region’s cultural hubs, SA offers enticing property opportunities. The combination of a favourable exchange rate and a shortage of inventory has driven home prices up 25 to 30 percent. Even with these increases, the weak rand still makes SA luxury property an appealing value proposition for overseas investors.”

Greeff was quoted in the Christie’s International Real Estate publication as saying: “The standard of property available at these prices globally is incomparable to what Cape Town offers by way of accommodation, size, and way of life. Luxury properties, especially waterfront Cape Town homes, offer enduring value to international buyers – in particular those from the northern hemisphere.”

“Locally, the rand still has significantly greater value than it does beyond our borders, so luxury homes are available at well under the equivalent of US$1 million,” says Greeff.

“In many areas of the peninsula, properties priced from R10m fall into the luxury market category and in Cape Town, this market sector shows no signs of slowing down.

“The Atlantic seaboard generates the most sales revenue with a total of R2 918 409 075 recorded by Propstats from April 2015 to May 2016. This was 12 percent higher than the R2 603 607 200 generated from April 2014 to April 2015,” says Greeff.

“Year-on-year figures for the southern suburbs indicate a 27 percent growth in sales revenue rising from R595 830 000 to R758 150 000. Constantiaberg sales revenue totaled R706 955 000 from April 2015 to May 2016, a 37.6 percent growth from R513 852 480.

“The highest growth percentage according to Propstats was for sales revenue generated in the City Bowl. This more than doubled from R213 040m from April 2014 to April 2015, to R578 480 000 reported for April 2015 to May 2016.

“In False Bay total sales revenue grew by 48 percent from R37m from April 2014 to 2015 to R55m from April 2015 to May 2016.

“This solid trend of growth in the luxury real estate sector internationally and locally is significant, and is echoed in the Luxury Defined report as a prevailing sentiment across the board in the Christie’s Real Estate network of affiliates, that wealthy people are likely to continue to invest in property because it can weather changing economic cycles, creating long-term value and superior risk-adjusted returns,” says Greeff.

“Property across the board in all sectors of the Cape market appears to be topping the list for buyers and April has been a record month for Greeff with a total revenue of R211 million.”

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