Bugle Sales Talk Editorial

This 110% decline over this relatively short period is sobering and starts to give us a sense of our rating as a country on a global financial playing field. Given that our Rand has become so much cheaper to the US$, our local real estate must surely look like good value? Does a decline in the exchange rate lead to increased foreign buying of our local residential property? The recently published FNB Estate Agent's Survey looks carefully at the level of foreign buying of our residential property and provides some interesting insights.

The percentage of foreign buying is currently estimated at 4,5%, somewhat down from a recent peak of 5,5% despite the Rand weakening and although up from the low point of 2% measured in 2011, it is still well below the 6,5% measured in 2008. The figures therefore suggest that there is more than just the relative exchange rate at the time that drives foreign interest and buying of our residential properties. As a weak Rand also reflects weak investor confidence or sentiment towards South Africa, this works against the alluring value that prices that are significantly lower in Dollar terms would convey.

For South Africans living abroad in the UK, US or Dubai it has to be a great time to consider securing a property in South Africa. Seeff has formed a strategic partnership with UK based Hamptons International, which is part of the Countrywide group - the UK's largest real estate company. At a recent press launch I attended, the head of Hamptons International, Alasdair Hedley, drew our attention to the fact that an estimated 400,000 South African ex-pats live in London with an additional 100,000 outside of London. With this marketing channel available to local developers and sellers it would seem like a great opportunity to reach that market.

In their report FNB indicate that the more significant driver of foreign home buying in South Africa, is the performance of residential property as an asset class globally. Knight Frank publish a Global House Price Index which is an excellent way of estimating the appetite for residential property across the world. The growth of global prices has decreased from 6.4% in late-2013 to a negligible 0.1% as measured in the 2nd quarter of 2015. So with the global economy slowing down, the expectation is therefore that demand for residential property as an asset class would be diminished.

Of the 4.5% of foreign buyers that we do currently attract, Johannesburg and Cape Town are the two leading destinations for investment. The estimate of foreign buying for Cape Town is 8.5% and for Johannesburg 5%. Durban only manages a 1.5% level unfortunately.

The mix of where foreign buyers originate from is interesting in that the rising trend towards foreign buyers from the African Continent continues and is now estimated to be 28%, the highest level since FNB started measuring this in 2010.

For further information and an interactive analysis of this article follow my blog: andreaswassenaar.blogspot.com.

Andreas Wassenaar

Principal - Seeff Dolphin Coast

Cell: 082 837 9094

andreasw@seeff.com