Whatshot
Property Talk
Property Talk
Date: 2017-02-03
Now that is an even more significant 31% strengthening of the Rand - or more appropriately the weakening of the Pound in the wake of the Brexit vote. When we look at the FNB House Price Index denominated in Euros, Dollars and Pounds we see the above changes in the exchange rates reflected with the Pound denominated price index increasing by 31,2%, the Euro denominated index by 12,9% and the Dollar denominated index by 9,4%.
This means that our local South African residential properties are significantly more expensive in Dollars, Euros or Pounds today than they were a year ago. As much as the weak Rand encouraged foreign interest in our residential properties in the first quarter of last year, the strengthened Rand now has a largely dampening impact on foreign-based demand. I personally believe the magic threshold is R15 to the Dollar. Our experience has shown that as soon as this level is breached the demand by foreign-based buyers suddenly shoots up. It's almost as if they have been watching and waiting for the threshold to be breached and then act decisively. The relative value our properties offer at that level is simply too significant to ignore. A Zimbali beachfront mansion in January 2016 would have cost £ 1,427,988. A year later the same property carries a price tag of £ 2,071,005. The smart money acted quickly and decisively in January 2016 and snapped up what they could get their hands on.
Although relative price is one driver of foreigner housing demand FNB make the point in their report on foreigner home buying in South Africa that the global popularity of property as an asset class is a fundamental driver of demand and that 2016 was a generally strong year for global housing. When measured as a percentage of total buyers, foreign buyers in South Africa made up 5,2% on average in 2016. This was up from 4,5% in 2015 but not too dissimilar from the 5% recorded in 2014. This tends to indicate that it is more than just relative price that motivates foreigners to buy property in South Africa.
Another interesting measurement FNB have come up with is the Foreign Home Buying Confidence Index. This statistic peaked in the last quarter of 2014, but since 2015 has fallen to zero, and a bit below, indicating that foreign buying in South Africa has leveled out. What about the African Foreign Home buyers as a percentage of foreign buyers This has increased from a low of 10,5% in 2010 to an average of 27,95% for 2016 - the highest level since this statistic has been recorded. This also provides insight into the growth of wealth in some of the African countries and how they view South African real estate as a desirable investment opportunity.
For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.