Luxury property prices in the exclusive Atlantic Seaboard market - a top performing real estate belt for well over a decade in South Africa - are at their lowest level in ten years. And with plentiful supply and flat price growth over the last three years, this sector is presenting one of the best buying opportunities in over a decade.
A South African buyer has just snapped up an ocean-level 3rd Beach bungalow for a total of R17.84 million. Facing onto the famous wind-free beach in Clifton, the bungalow with uninterrupted views of the Atlantic Ocean is just a step away from the sand and is one of only seven properties with direct beach access, with the property already having approved plans for a swimming pool.
High Street Auctions Director and Lead Auctioneer Joff van Reenen confirmed the sale saying, “The seller approached High Street auctions with the expectation of finding an un-suspensive true market value for this asset and that’s what we delivered.
"There has been a substantial market correction across every fixed asset class nationally because of massively depressed economic sentiment, and the top end of the residential sector is feeling the effects. “The real estate market is cyclic, though, and it often takes sellers a while to catch up when this changes.
“At the moment there is still a fairly large gap between most sellers’ price expectations and current market levels. The sooner sellers realise this, the sooner they’ll begin to realise true market value for their assets, and at auction conclude a sale which in today’s market is key.
'High-net worth individuals refocusing'
Berry Everitt, CEO of the Chas Everitt International property group previously confirmed luxury homes in SA are now between 19% and 21% cheaper than they were at the start of this year for those buying in euros, pounds or dollars.
“We also believe that even before the virus crisis is over, high-net worth individuals (HNWIs) around the world will be refocusing their investments away from equities and other avenues that have proved very risky in uncertain times and towards real estate, which has traditionally been a “safe haven” in the longer term.
Prior to the Covid-19 crisis, New World Wealth put the cost of prime property in SA’s top cities at between US$2 500/sqm and US$5 000/sqm, compared to around US$8 900/sqm in Washington, for example, and much more in cities like Tokyo (US$17 000/sqm); Paris (US$18 000/sqm); Zurich (US$20 000/sqm), Sydney (US$25 000/sqm); Hong Kong (US$28 000/sqm) and London (US$33 000/sqm).
“However,” Everitt says, “this all becomes even more appealing in the light of the latest currency decline, which means that a R10m property that would have cost investors around US$703 000 at the start of the year will now cost just US$556 000.
“Similarly, a R10m property that would have cost about Euro635 000 or GBP538 000 back in January will now only cost around Euro509 000 or GBP446 000. Any transfer duty on the purchase would of course also be reduced.”
Opportunity knocking
New listings are up to about 200 in Clifton, Camps Bay, Fresnaye and Bantry Bay, says Samuel Seeff, chairperson of the Seeff Property Group say
Whereas the low- to middle-income sectors are seeing a notable uptick in activity on the back of pent-up demand, the top end is heavily influenced by sentiment which is at an all-time low according to the latest RMB/BER Business Confidence Index (BCI).
Ross Levin, managing director for Seeff Atlantic Seaboard and City Bowl says during the boom years of 2016-2017, the market was doing about five sales per month in the R20 million-plus sector with prices reaching R80 million to R120 million in Clifton. Last year’s highest price reached just R60 million in Fresnaye and this year so far, just R34 million in Camps Bay.
With no real price movement in the super prime sector, this is arguably one of the best periods for “bargain hunting” that we have seen in the last decade. Levin adds that there are now many new listings not seen before while sellers are motivated to take lower offers.
He points out that property values rose faster than anywhere else and doubled in the five years between 2012-2017 at the peak of the last mini boom.
The location and uncompromised views remain the biggest drawcard. Although it is still early days under Level 3, Levin says there are encouraging trends emerging, in particular a renewed interest from semigration buyers.
Upcountry buyers are considering the Cape Town lifestyle with the mountain and sea as an alternative to emigrating. People are not as restricted by their businesses as we move to a more technological world, and if they need to be at home, they want the mountain and sea on their doorstep.
This, he says further, is where the current high-end interest is coming from and will hopefully drive that market going forward. This is one area where history has shown that if you take a long-term view, you can reap rewards when the market cycle ticks up again.
While we are seeing a high quantum of viewings from the initial pent-up demand, ultimately, he concludes, buyers want value and there is plenty to be had here right now.
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