Foreign real estate investment a mixed bag of upticks and downturns

News > Market & Opinion - 02 Jul 2019

Despite the political uncertainty that’s increasingly deterring foreign investment, there is still significant interest from international buyers in certain areas where buyers believe they get more bang for their buck than in comparable areas abroad, but in other parts, it’s all but dried up.

Chris Cilliers, chief executive, and principal for Lew Geffen Sotheby’s International Realty in the Winelands say that they are still seeing considerable interest, especially from European buyers.

Currently, in the process of concluding an R19 million sale with German investors with another for over R50m pending, Cilliers says that the majority of their enquiries come from German and Swiss buyers.

“When we were showcasing Val de Vie Evergreen, the exclusive lifestyle retirement village on the Val de Vie estate at the Hafengeburtstag Hamburg, the world’s largest port festival and expo, last year, we were astounded at the amount of interest that was shown.

“Encouragingly, most of the attendees who expressed interest were surprisingly undeterred by the water situation or the land expropriation issue.

“However, unfortunately, increased delays in the approval of retirement visas and particularly their renewal after the initial four-year period, is now starting to negatively impact this sector.

Cilliers adds that there have, however, been considerably fewer investment sales to expats, with a notable decline in the buy-to-let sector - and the number of returning expats has dwindled with more of their migrant clients now leaving than returning.

Constantia is one of the few areas where both foreign and expat investment have remained relatively consistent.

According to Area Specialist, Joanna Thomas, most of their international buyers hail from the UK and are drawn by a number of compelling factors, including the tranquil country atmosphere, sizeable homes on generous grounds and proximity to top-class amenities and excellent schools.

“The majority buy property to live in, but Constantia has its fair share of swallows who like to escape icy European winters. We also receive encouragingly regular enquiries from expats who miss their families and the inimitable South African lifestyle.”

Long-regarded as the jewel of the Garden Route, Plettenberg Bay has always attracted its fair share of foreign interest, with international buyers generally accounting for 8% to 10% of all sales, according to Steven Neufeld, Manager Principal of the Plettenberg Bay office.

“However,” says Neufeld, “whilst there are still foreigners looking to purchase, sales have been slower this year, accounting for only 3% of our total sales to date.

“This can largely be attributed to the ongoing economic and political uncertainty, especially corruption and the land expropriation issue.”

Majority of the sales are cash transactions and the predominantly European market in the scenic coastal town is dominated by German and British swallows purchasing second homes, but there is also growing interest from buyers in Hong Kong, the Middle East, and neighbouring African countries.

The coastal regions aren’t the only areas to have enjoyed foreign interest in recent years, although the buyer demographics do differ inland where foreign nationals generally buy property for work rather than leisure purposes.

Over the past decade, Pretoria East has become a popular residential destination for foreign diplomats and industry leaders who are attracted by the world-class estates in the area, with diplomatic communities established in the most exclusive estates.

This is according to Juanita du Plessis, Estate Living Manager for the group in the area, who says: “Developments like Silver Lakes and Woodhill Golf Estates have been especially popular due to the upmarket lifestyles they offer with world-class amenities and high standards of security which meet the criteria of diplomatic security.

“Many are posted here for a fixed period of between four and eight years and prefer to buy property rather than rent in order to benefit from the capital growth of the investment, although a fair number do also rent.

“However, over the past two years, there has been a significant decline in both foreign investors and tenants in these estates, with no notable sales during this period.”

Midrand, which has burgeoned in recent years due to a steady inflow of investment, particularly in the new Waterfall precinct, has become increasingly popular with both local and foreign investors because of its central location, broad spectrum of properties and world class amenities.

“There has been a slight uptick in international enquiries, especially in the current buyers’ market,” says Grahame Diedericks, Manager for Lew Geffen Sotheby’s International Realty in the area.

“Seasoned foreign investors are seeing the current listings drop in line with market trends and are starting to take advantage with hopes of a potential surge in the housing market.

“Most of our buyers are from other African countries or Europeans with family ties to South Africa, including expats reinvesting in the country which is promising.”

He adds that the growing commercial component in Midrand is also attracting more corporate buyers, with their most recent sale being to a European corporate tenant who decided to remain in the country and buy his rental property in Waterfall.

Cilliers concludes: “South Africa has so much to offer international investors and expats, including excellent value against major currencies, with the appeal further driven by the fact that South Africa is home to several internationally acclaimed and award-winning destinations.

“The only thing lacking is economic and political stability to foster investor confidence and assuage the current cautious sentiment.”

economy property market buyers luxury property
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