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Property Talk

Property Talk

Author: Andreas Wassenaar
Date: 2018-04-20

Foreign home buying from African Continent

The relative weakness of the Rand with respect to the major hard currencies such as the US dollar, Euro and Pound often create the impression that foreigners are the key buyers of our high-end properties and that they typically pay a premium for our residential opportunities.

Nothing could be further from the truth.

The foreign based buyers we have contact with are typically very astute and well-informed on local values and tend to focus on the price range that is well below the level many high-end South African purchasers consider.

Foreigners in general tend to be cautious regarding the amount of capital they import to purchase a property and consider the country risk when deciding on a purchase. Even though they realize they are getting great value for their hard currency in South Africa, they tend to place limits on their investment.

The recently published 1st quarter 2018 FNB Estate Agent Survey estimates the domestic residential property buying by foreigners. The estimate as of the end of the 1st quarter is 4.33% of total home buying. This is slightly up on the 4th quarter's 3.96%, but it is not a significant difference, and down from the 5.72% high reached in the 3rd quarter of 2016.

Based on the Estate Agent Survey FNB compile a Foreign Home Buying Confidence Index. This index was at its strongest positive level as at the 4th quarter of 2014, having climbed since 2012. Since 2015 however the indicator's level has fallen, and in 6 of the past 8 quarters it has been in negative territory.

The estimated foreign home buying from African Continent foreigners as a percentage of total foreigner home buying has declined from a peak of 31% in the 1st quarter of 2016 to the current level of 21.29%. This slowdown reflects tougher African economic conditions compared to those in more developed nations in recent years.

Another interesting sub-group of foreign buying is the South African expat group living abroad. Although there was a slight increase over the past quarter to the current measure of 1.51% of total buyers, this is down from the recent peak of 2.65% of total home buying measured in the 4th quarter of 2018.

The South African Expat buyers confidence index has shown 6 quarters of negative growth the last quarter showed positive growth indicating a change in sentiment. There is no doubt that the dampened investor sentiment during 2017, the uncertainty regarding economic policy and the sovereign debt rating downgrades had a direct and material impact on foreign buying of our residential properties.

All the signs are currently pointing to an improvement for 2018 and with that we can expect foreign interest to return. Zimbali is currently offering exceptional value in the R6m to R8m price range which is the sweet spot for foreign based buyers.