Picture: Richard Gray of Harcourts
Last week Dr Andrew Golding, CEO of the Pam Golding Property Group, shared his views on the continued interest in the South African real estate industry by foreign buyers. This week we asked Richard Gray of Harcourts what his views ion this important issue is.
“We believe that it is still a very attractive proposition in terms of the value received for the purchase price paid. With regards to the strength and exchange rate of the USD/EURO and other foreign currencies, the purchase price in real terms remains affordable compared to what can be acquired in some first world countries. Accordingly, with overseas buying power and property values in South Africa real estate remains a good investment.
“The majority of foreign investors still appreciate the quality of life and lifestyle as well as the space available to enhance their living requirements in South Africa. The limited living space available to them as well as the restricted conditions applicable in their respective countries during Covid-19 lockdowns, made them reconsider investing in property in South Africa. So, if anything, the pandemic has made South Africa a more attractive option for foreign buyers,” “Gray explained.
He referred to the possible influence the load shedding crisis caused by an incompetent management at the national electricity supplier Eskom could have on the industry and said that it does not affect the sales directly.
“It does not influence sales significantly, although it will be considered in evaluating the economic progress of the country and the sustainability of their investments. However, most potential buyers from abroad does not see it as an insurmountable hurdle. Many are also looking at ‘green’ and ‘off the grid’ solutions when purchasing in South Africa to mitigate against load shedding.”
Gray said work at home property, security estates, the leisure market and high-end properties are among the property types which are regarded as important by foreign buyers. Once again, the security estates and high-end lifestyle offerings are prioritised. Security is a major factor for buyers from Europe in particular, and security estates provide this.
He said the economic slump is currently a double-edged sword since some foreign buyers see it as an opportunity to invest and snap up reasonably priced properties.
“On the other hand, others believe that the risk associated with investing in uncertain economic times is too high. Of course, property remains one of the more stable asset classes and given the relative value for money in the South African property market, it is attracting buyers away from other more expensive markets.
Referring to the location of the most popular locations for foreign buyers and whether cities are more popular than the countryside, Gray said there has been a shift in buyers opinion regarding this in that remote working possibilities has created a higher demand in the countryside than previously. Whether this is a short-term trend, or whether it is a future reality, is not certain yet.
“There is still a decent demand for flats in university towns, however lockdown created a bigger need for spacious properties. Apart from flats in areas like the Cape Town Waterfront and Sandton, the bulk of buyers still seem to like the space that they can get in South Africa as opposed to Europe.
“There has been a downturn in the market for wine farms for quite some time, because of various factors including, but not limited to the land expropriation matter, economic uncertainty and political instability. The demand in this market however is mostly lifestyle related.
“I don’t believe that local issues such as the investigation by the Zondo Commission, the high rate of corruption and day to day politics have a massive impact one way or the other. Domestic politics, unless it leads to violence or safety issues, doesn’t play such an important role with foreign buyers.
Many of them view Africa like South America and parts of Asia as inherently less ‘governed’ than Europe, Australia or the USA and their expectations are lower than in their own countries. If they are safe, and their properties are safe, they are generally comfortable to invest in South Africa.”
Gray is optimistic about the short-term future of the South African property market.
“I believe that the residential property market will continue to perform at strong levels based on the low interest rate. There is a shortage of stock, but this hasn’t led to inflated prices, and properties are changing hands at fair value.
“More stock will be made available as developments come on board, and this should see a relatively balanced market for the medium term. It is also unlikely that there will be any sharp rises in the interest rates. Banks are lending to buyers and although the overall economy is under pressure, people are appreciating the importance of home ownership.
“Vaccinations are reaching advanced levels of penetration in Europe and the USA, and this will start to see more foreigners returning to South Africa over the next 6 months. By the end of the 6 months, we expect foreign buyers to be very active again in our market,” Gray predicted.
- In coming weeks we will also hear what other leaders in the property markets have to say about foreign buyers of South African properties.