Fewer foreign buyers are investing in homes in South Africa, and while this has little noticeable impact domestically, it underlines the tough conditions confronting the property market.
“At the end of the day, a fall-off in foreign buyers is not structurally significant for property prices, but it removes opportunities from the local market,” says Gray.FNB’s Estate Agent Survey, published earlier this month, estimated that 5.11% of property buyers in the 1st and 2nd quarters of 2016 were foreigners. This was within an overall range of around 5% recently.
Richard Gray, Harcourts Africa Chief Executive Officer, says this represents a decline off a recent high of 5.77% in mid-2014 - and an even greater decline from the 7% recorded in 2005, a more prosperous time.
“For South Africans, the influence of sales to foreign nationals is relatively small, and as the report notes, the trend appears to have flattened out,” says Gray.
“Certainly, well-heeled foreign buyers seeking homes-away-from-homes might be in a position to make attractive offers on top-of-the range neighbourhoods. We see some of this on the Atlantic seaboard, for example.”
He says the effect of this should not, however, be overstated.
“These big deals are, in any event, rare. For the most part, foreigners are seeking good deals - just like South Africans,” he says.
“And many foreign buyers are seeking residences, having come to South Africa for work, business or settlement. The stereotype of idle-rich holidaymakers is definitely not reality.”
Foreign buyers were most prominent in Cape Town (8% of total buyers), Ethekwini (6%) and Johannesburg (5%). Some 27.5% of foreign buyers were from elsewhere in Africa.
Gray says the survey also argues that, while the recent appreciation in the value of the rand may have reduced the attractiveness of South African property to foreigners, it is not decisive.
Rather, he says a general slackening of the global property market - slower house price growth and a decline in housing as an asset class - seems to be dampening foreigners’ interest in local property.
“At the end of the day, a fall-off in foreign buyers is not structurally significant for property prices, but it removes opportunities from the local market,” says Gray.
“This is part of the constrained environment that sellers and estate agents have to contend with today.”
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