A penthouse in the V&A Waterfront in Cape Town sold for R45 million.
* *The low interest rate seemed to have little impact on the luxury housing market, but this seems to be changing.*
* *There has also been in increase in foreign buyers looking for and buying property in SA.*
* *The March Lightstone Residential Property Index shows that annual house price inflation was 4.0% at the end of February 2021 signifying a positive increase from the previous month.*
Luxury homes are back in demand in South Africa, according to Megan Ladbrook, general manager of Frankie Bells Real Estate, which specialises in luxury real estate.
The agency defines luxury homes as those priced from R3 million upwards. They are seeing an increased demand in the Northern suburbs of Gauteng, southern suburbs of Cape Town and in coastal towns such as Ballito, Knysna and Plettenberg Bay.
"While the low repo rate has driven demand amongst first-time home buyers and buyers in the low to mid-price range, it has had little effect on the luxury housing market," says Ladbrook. In her view, however, this is about to change.
"As investor confidence begins to rise, global statistics released by Luxury Portfolio International (LPI) has indicated that between 30% and 50% of high net-worth individuals are planning to buy at least one additional luxury property in the next year – compared to just 20% last year," she adds..
At the same time, it is important to remember that the luxury market has taken a knock in terms of asking price.
"We have seen homes go for as much as 30% less than the initial asking price," she says. "We are dealing with a surplus of luxury homes on the market. Key drivers for the sales of these homes include so-called semigration between provinces, the need to upscale or downscale, and emigration," she explained.
In addition, a number of properties used as Airbnbs are now up for grabs. These homes are usually well kept and well located. Among South Africa buyers, gated communities and lifestyle estates remain in high demand. In addition, those with extra money and looking to take advantage of the low interest rates are now investing in holiday
homes.
*Foreign buyers*
According to Samuel Seeff, chair of the Seeff Property Group, it has seen increased activity from foreign buyers at the high-end price levels. One such example is the sale of a R45 million penthouse in Cape Town's Waterfront area to a German buyer.
The group also recently sold a R36 million property in Fresnaye, Cape Town to a buyer from the United Arab Emirates and two sales of more than R20 million each in Constantia Upper to buyers from Zimbabwe and Malawi respectively."Overall, sales to foreign buyers across Cape Town's Atlantic Seaboard and City Bowl are 36% higher compared to 2019 and is the highest in the past three years. Almost one third of all high value sales have been to foreign buyers," says Seeff.
"While the luxury areas are doing exceptionally well in the price bands to around R5 million to R8 million (R18 million on the Atlantic Seaboard), sales in the R20 million-plus sector remains well below what it was in 2017. That said, sales are taking place across the board in the high-end areas from Zimbali to Plettenberg Bay and Cape Town as well as in certain Gauteng locations." He explains that, generally, the market remains driven by the low interest rate with the highest volume of activity still below R3 million as first-time buyers continue taking advantage, but they are also seeing buyers upgrading, or investing or relocating for a better quality of life. At the top end of the market, buyers can find great value given that prices of properties, often not seen before, are now at about 20% to 30% lower compared to 2017, according to Seeff.
The March Lightstone Residential Property Index shows that annual house price inflation was 4.0% at the end of February 2021 signifying a positive increase from the previous month. According to the index report, this optimism is evident at provincial level and the different value bands with the exception of the low-value segment (properties of less than R250 000). This is because the historically low interest rate has enabled both the participation in the higher value market for new homeowners and the ability to upgrade for low-value homeowners.