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Property Talk

Property Talk

Date: 2019-07-19
This year will belong to the buyers

Emigration selling has become more prevalent over the past two years and most agents have had clients that have decided to sell or rent their properties as part of their migration strategy.

There are however foreign and ex-pat buyers active in our market and FNB have recently published their property barometer report analyzing the net effect of emigration on our domestic property market. Interestingly there has been a slight increase in foreign buying in our local market since the recent low of 2,98% of total domestic buying in 4Q2018, and 3,61% in 1Q2019 to the current 3,74% in 2Q2019.

This level of foreign buying remains below the 5,72% peak in 3Q2016 and the 4,4% long-term average. What I found very interesting from the FNB report is that foreigners have become less prominent in the Cape Town market over the past year decreasing from 10,7% in 2Q2018 to 6,5% in 2Q2019. Durban and Port Elizabeth seem to be experiencing an increase in foreign buying.

According to FNB these estimates of foreign buyers are 1,9% and 5,1% for Durban and PE respectively. For Johannesburg foreign buying has increased from 2,6% in 4Q2018 to 4,7% in 2Q2019.

Pretoria however is reported to have experienced a decline over the same period from 2,4% to 1,3%. Foreign buyers from the African Continent are reported has being behind the recent uptick in foreign demand and as of 2Q2019, 24,5% of all foreign purchasers are reported to be from the African Continent.

Although this is up from the 18,6% in 2Q2018 it is still below the 31% peak experienced in 1Q2016.

The level of South African ex pat buying of domestic residential property has remained at 0,7% with the longer term trend being downwards from the 2,4% of the market in 2014.

The net foreign effect in our market is the difference between the emigration selling and the foreign buying. For a period between 2011 and 2014 we experienced positive net foreign buying, peaking at 6% in 4Q2014.

Since then it has been a steady decline with the net foreign demand now recorded as -9% as of 2Q2019. This is rather a shockingly high net outflow of foreign /emigration buying/selling. The reason for this can be argued to be the poor investor sentiment towards South Africa in general.

FNB predict that the current negative net foreign demand will remain a drag on property prices until such time as perceptions about the country improve materially and a substantial improvement in GDP growth is experienced.

For those active agents within the greater Ballito area, the early signs of more active buyers shopping in the market can be seen.

Buyers understand the market they are currently in and also realize that it is a window of opportunity to take advantage of. In many cases buyers are overly aggressive in their pricing but do from time to time secure properties at surprisingly high discounts.

Sellers are feeling the fatigue of hanging on in a weak market and many are adjusting pricing down-wards to meet the market demand. This year will belong to the buyers but 2020 can be expected to be the year of change and the resurgence of a more equally weighted market.