South African investors now eyeing the global property market
South African property investors, disillusioned by the country’s economic and political woes, are scouring the globe for new and seemingly safer opportunities for their money.
Although this week’s announcement the country’s GDP recorded growth in the second quarter of 2019 could reignite investor optimism, property price growth slowdown across the world’s leading prime city housing markets remains an attractive prospect for local property investors.
“There are a number of reasons why the prime residential markets in global cities are seeing a slowdown, with government policy, the cost of money, increased supply and global economic uncertainty all playing their part,” says Sophie Chick, head of Savills World Research.
Latest data from Savills World Cities Prime Residential Index shows Berlin and Paris have seen stand-out growth for prime residential property of about 4% over the past six months and 8% over the last year. Both markets have low supply levels coupled with increasing demand from domestic and international buyers.
The report also says in Sydney and Cape Town, values have increased significantly over the past five years, but are now experiencing price falls as affordability, among other things, slows the market.
Pam Golding Property Group chief executive Andrew Golding, says investors should remember, however, the Cape Town premium market’s correction is in line with the bulk of global prime city markets.
He says the downward adjustment in prices has improved perceived affordability in the market and is making aspirational markets, such as the Atlantic seaboard and City Bowl, more accessible to a broader range of South African buyers. The UK’s second city, Birmingham, is also booming and is rapidly becoming investors’ first choice, says Craig Warwick, regional business development manager for South Africa at SevenCapital.
Even Londoners are taking note, with a large proportion of the city’s millennials moving to Birmingham. When asked why, Warwick says it comes down to potential and Birmingham has this in “abundance”.
“Where London has already peaked, leaving little room for further growth in terms of house prices, development space and amenities, Birmingham has plenty of room, and three crucial ingredients: future transport links, relocation of large employers and one of the youngest populations in Europe. Notably, around 75% of the core city centre population is under 35.”
For South African investors particularly, Portugal’s capital, Lisbon, and second largest city, Porto, are hot spots for those looking to acquire EU citizenship via the country’s Golden Visa Programme. A minimum investment of 500000 euros (about R8.2million) affords them visa-free travel in all 26 countries in the Schengen zone and enables them to live and work in any EU country, says Chris Immelman, who heads Pam Golding International.
“Ranked ahead of Berlin, Dublin, Madrid, Frankfurt and Amsterdam, dynamic Lisbon is considered one of the smaller newcomers to the Top 10, vying with the larger, tried and tested markets in terms of these criteria, as well as ‘quality of life’ and ‘leadership’.
“Since we began marketing property in Portugal a few years ago, we have concluded real estate transactions with close to 300 South Africans who have taken up this opportunity at a total value of about 150m euros, with Lisbon and Porto the most popular locations.”
Immelman says the bulk of the agency’s South African investors are from the major centres and the Boland region in the Western Cape. Carl Coetzee, chief executive of bond originator BetterBond, says the 3.1% growth in South Africa’s GDP in the second quarter, from a decline of 3.1% in the first quarter, means the country has a better chance of avoiding a sovereign debt rating downgrade by Moody’s in November.
Moody’s is the only one of the top three agencies to still award South Africaan investment-grade rating and losing that would be an automatic signal for institutional investors to withdraw billions from the country’s markets. “On the local front, the GDP turnaround is likely to improve economic confidence and bolster a spending increase and that is excellent news for real estate.”