Cashing in on Cape luxury

Although the luxury sector usually bears the brunt in a market slump, often showing the biggest decline in property sales and sale prices, it’s also the sector where savvy investors, especially cash buyers, use the brief window of opportunity to swoop in and snap up deals.

However, this time round investors are a lot more cautious and a number of upmarket areas have seen very little, if any, activity this year.

One such area is the Atlantic Seaboard where a Clifton bungalow, one of only seven with direct beach access, was recently sold under the hammer by High Street Auctions for R17.84 million.

The exclusive strip is known as one of the highest-valued property markets in South Africa, with Clifton the crown prince, and four years ago this unique property would most likely have fetched well in excess of the R20m trophy home mark.

However, since 2017 there has been a steady price correction in Clifton with Propstats data revealing that the average difference between the asking and selling prices of freestanding homes has grown annually since then, from 11.2% in 2017 to 22.3% a year later and by the end of 2019 it had risen to 33%.

Another luxury market with little movement at the upper end is the sought-after enclave of Bishopscourt where, according to Lightstone, only six sales of homes priced above R10 million in the sought-after enclave were registered during the last 12 months to date.

But area Specialist for Lew Geffen Sotheby’s International Realty, Barbara Manning, believes that this is largely due to the fact that very few sellers in the suburb are under pressure to sell and the lack of seller urgency is holding prices steadier than in some other upmarket neighbourhoods.

“Most of the home owners here are in the 50 plus age group and those who are thinking of selling are retirees and empty nesters looking to downsize, so there is generally no sense of immediate urgency.

“They are therefore less inclined to drop their price expectations and many sellers are simply withdrawing their properties altogether in the hope that the market will pick up again, although I think it’s very unlikely to recover to that extent any time soon.

“So, although there is still some investor interest, most are looking for excellent value for money and making very low offers - and sellers are unwilling to reduce their sale prices to that extent.”

Interestingly, although there has been a discernible drop in property prices and market avtivity in Bishopscourt, the gap between marketed and final sale price has remained more consistent since the downturn, increasing by only 1.88% from 13.1% in 2017 to 14.98% last year.

Chris Cilliers, CEO and Co-Principal for Lew Geffen Sotheby’s in the Winelands, reports a more active market with considerable pent-up demand after a long, subdued period followed by the restrictive lockdown.

“Initially, many people adopted a ‘wait-and-see’ attitude, especially regarding the economy’s downgrade to junk status, light at the end of the tunnel regarding Eskom’s woes and political and economic uncertainty.

“However, with the onset of the coronavirus, most of these issues passed by quietly and, with the Rand devalued but not down-and-out, we are seeing an encouraging amount of investor interest with people are starting to make decisions about their lives again, including moving home.”

Cilliers says that there has been encouraging buyer interest in luxury homes in recent months, with some properties even selling at full asking price, although many investors have benefitted from significant price reductions.

“There are a number of serious sellers at the top end of the market at the moment, especially those who have been wanting to sell their homes from the beginning of the year and already had confirmed emigration or semigration dates.

“Sadly, we are also starting to receive enquiries from sellers who have been placed under financial pressure due to the COVID pandemic.”

Steve Thomas, Secure Estate Specialist for the group in Constantiaberg, says: “The market is under unprecedented pressure as the modern world has never had to contend with a global pandemic of this scale which has unleashed a flood of new uncertainties.

“Add to that South Africa’s growing political and economic turmoil, and investor sentiment is decidedly nervous at the moment.

“This sentiment is not entirely baseless considering we are in largely unchartered waters but, as history has shown us, the real estate market always works in cycles and, to a large extent, it operates independently from the prevailing climate which is why it has proven to be one of the most resilient asset classes.

“And, with interest rates hitting historic lows and buyers spoilt for choice with plenty of deals to be had, right now property is definitely one of the most stable investments one can make, especially when compared to a very volatile global stock market.

“Investors world-over will be looking at high end property as an alternative to stocks and bonds and many foreign buyers are turning their attention to emerging markets where favourable exchange rates are likely to add even more value.

“Right now, buyers with hard currency to spend in countries like South Africa are in the pound seat.

“Not only are house prices lower than they have been in many years, in some areas by as much as 30%, the Rand has devalued around 20% against the dollar since the beginning of the year, so theoretically, they could be paying up to 50% less than they would have for the same property a year ago.”

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