“Instead, we are seeing a rapid increase in the number of prospective buyers from elsewhere in Africa (notably Nigeria, Ghana, Zimbabwe, Tanzania, Angola, Mozambique and the DRC); from some of SA’s partners in the BRICs grouping, namely India and China, and from other countries in the Far East.”
The reason for this shift, he says, is that foreigners buying in SA are generally not buying primary residences, but holiday homes or investment properties. “In other words they are usually wealthy individuals with funds to spare – and with the Eurozone having taken an economic beating in recent times, there are fewer individuals there in that position.
“The fallout from the Brexit vote has similarly diminished the number of potential buyers from the UK, because the worldwide drop in the value of the pound immediately made SA property about 10% more expensive for them than previously, and then even more expensive as the rand started to strengthen again.”
By contrast, Clarke says, the number of high net-worth individuals (HNWIs) able to invest abroad has been increasing in both Africa and Asia, where many countries have enjoyed relatively strong economic growth since the 2008/2009 global recession.
“According to the latest World Wealth Report compiled by global consulting group CapGemini, the total number of HNWIs (or multi-millionaires) around the world grew by just 4,9% last year to around 15.4-million. What is more, although the US still has almost a third of all HNWIs, the rate of increase there was only 2% in 2015, while the number of HNWIs in China grew by 16% and that in Japan by 11%.
“The Netherlands, Norway and Spain were the best performing countries in Europe, with a HNWI growth rate of 8%, while Germany managed only 5% and the UK 1%.”
As for the total wealth of HNWIs, he says, it grew by around 4% last year to just under $59tn, and the Asia-Pacific region edged past North America for the first time to become the region with the highest amount of resident HNWI wealth, totalling $17.4tn.
“The report also shows that the number of HNWIs in Africa grew from 118,000 in 2010 to 145,000 in 2015, and that their total wealth equals around $1.4tn, so the continent still has a long way to go in terms of creating multi-millionaires, but while European HNWIs already hold around 22% of their wealth in cash and only around 20% of their assets in real estate, Africa’s super-wealthy currently only have 20% of their assets in real estate and 26% in ready-to-spend cash.”
“Meanwhile HNWIs in the Asia-Pacific region have 21% of their assets in real estate and 23% in cash – and continue to allocate high levels of their assets internationally.”
Clarke says that there is of course never any guarantee that global multi-millionaires will spend their money on SA real estate, “but according to First National Bank, the percentage of local property sales attributable to foreign buyers is still over 5% this year – compared to a low of 2% recorded in 2010".
“In addition, FNB says that buyers from other African countries were responsible for around 27.5% of these sales in the first half of this year, compared to just 8.5% in 2010.”
Having said that, however, he notes that it is important for SA homeowners not to focus too hard on “landing” a foreign buyer. “Only about 13,000 of the estimated 260,000 home sales in SA each year are made to non-residents, and they are still largely concentrated in just a few areas. Consequently, local sellers would be well-advised to prepare and price their homes with SA buyers in mind.”
