Rand decline a big plus for SA’s luxury real estate

South Africa has a wealth of world-class luxury real estate to offer foreign investors – and it’s currently selling at a huge discount.

That’s the message that should be going out all over the world in the wake of the COVID-19 crisis and the Moody’s downgrade of SA’s economy which together triggered a significant drop in the rand exchange rate, says Berry Everitt, CEO of the Chas Everitt International property group.

“Even though the currency has regained some ground in recent days, we calculate that luxury homes in SA are now between 19% and 21% cheaper than they were at the start of this year for those buying in euros, pounds or dollars.

“We also believe that even before the virus crisis is over, high-net-worth individuals (HNWIs) around the world will be refocusing their investments away from equities and other avenues that have proved very risky in uncertain times and towards real estate, which has traditionally been a “safe haven” in the longer term.

“What is more, we think they are going to become much more independent when it comes to the management of their wealth – and the decisions they make about where to invest, irrespective of what the ratings agencies or so-called financial experts have to say. We are already fielding an increased number of enquiries from investors keen to move funds out of Europe and the UK, for example, and other areas hard-hit by the pandemic. 

“Consequently, we are using our affiliation to the global Leading Real Estate Companies of the World© and Luxury Portfolio International© networks now to really get the message out about the attractions of luxury real estate in SA and persuade more HNWIs to invest their foreign currency here. This will hopefully have the added benefit of helping to repair the post-COVID-19 economy.”

Of course, SA has a huge variety of real estate to offer affluent investors, he says, from magnificent high-rise apartments in Sandton, Cape Town or Umhlanga, to beautiful beachfront homes all around the coast, gracious mansions in secure golf, wine, equestrian and lifestyle estates, countryside retreats and super-private wildlife lodges deep in the bush.

“The excellent climate is another drawcard, especially for those who are seeking to buy a leisure property, and then there’s also the fact that luxury property in SA has always offered much better value for money than that in many other places popular with global investors.”

Prior to the COVID-19 crisis, New World Wealth put the cost of prime property in SA’s top cities at between US$2500/sqm and US$5000/sqm, compared to around US$8900/sqm in Washington, for example, and much more in cities like Tokyo (US$17 000/sqm); Paris (US$18 000/sqm); Zurich (US$20 000/sqm), Sydney (US$25 000/sqm); Hong Kong (US$28 000/sqm) and London (US$33 000/sqm).

"However,” Everitt says, “this all becomes even more appealing in the light of the latest currency decline, which means that an R10m property that would have cost investors around US$703 000 at the start of the year will now cost just US$556 000.

“Similarly, an R10m property that would have cost about Euro635 000 or GBP538 000 back in January will now only cost around Euro509 000 or GBP446 000. Any transfer duty on the purchase would of course also be reduced.

Meanwhile, he notes, many South African HNWIs who were contemplating emigration this year have put their plans on long-term hold because of the global economic effects of COVID-19. “Their money will thus be remaining in SA - and some are in fact already buying additional luxury homes here or upgrading to take advantage of the downward pressure on prices.”

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