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No brakes yet on property’s bull run

Neither the upcoming election nor the prospect of further interest rate increases this year has done anything to slow down the residential property market in the past few months.
 

This contemporary home in Sandhurst was recently sold by Sotheby's International Realty for R21m

That’s the word from Lew Geffen, chairman of Sotheby’s International Realty in SA, who says the top end of the market, especially, is strong countrywide at the moment – and “on fire” in Cape Town and Johannesburg.
 
“Sales volumes are up at least 5% across the board since the beginning of the year, and we have been experiencing record months in many areas. In March alone, for example, we sold R120m worth of property on the Atlantic Seaboard, including a V&A Waterfront property sold for R38m.


This Barbados-inspired home in Hyde Park was recently sold by Sotheby's International Realty for R11,25m 

“Other properties sold in this area in the past three months include a Clifton home sold for R49m and a Camps Bay property sold for R28m, while in Johannesburg we have sold more than R150m worth of ‘big ticket’ properties in the past three months, including two Sandhurst cluster homes sold for R28,5m each, a Sandhurst house sold for R21m, a rare vacant stand in Sandhurst sold for R13m and a Hyde Park property sold for R11,25m.”
 
What is more, he says, high-end buyers are apparently not averse to paying the higher prices that are the result of a growing shortage of properties for sale in the most sought-after areas – provided they see value-for-money.


This magnificent home in Camps Bay was recently sold by Sotheby's International Realty for R49m  

“The most recent Absa statistics show that the average price of luxury homes grew by just under 5% last year and that of large homes by 9,5%, and our own experience would suggest further gains in the first few months of 2014.
 
“Our average sale price achieved has risen 39% from R2,3m in 2012 to R3,2m currently and we are certainly experiencing far less buyer resistance than there was then - although it must be said that buyers in this sector are particularly well informed about market trends in the areas they are targeting, and averse to even viewing properties they regard as being overpriced.”
 
Meanwhile it is interesting that one major reason for the high level of activity at the moment, Geffen says, is a huge influx into the market of buyers employed by banks and other financial institutions.


This Cape Cod designer home in Camps Bay was recently sold by Sotheby's International Realty for R16m 


 “We are finding that up to 40% of sales in some areas are to these ‘institutional’ buyers, most of whom have pre-approved, 100% bonds, so we can only assume that they have been advised by their employers that now is a good time to buy and / or upgrade, before interest rates – and prices – rise any further.”
 
In addition, he says, high net worth buyers are generally good at reading markets, and have obviously picked up on the fact that time is running out if they still wish to upgrade from existing homes to more luxurious properties at a “discount”.
 
“Such buyers know very well that those who own luxury homes generally have no urgency to sell, and in fact tend to resist selling in a rising market. These owners will often actually withdraw their properties from the market and thereby create a shortage of supply that immediately drives prices even higher, which is exactly the scenario we now see developing.”


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