Property Talk

I am often asked if Zimbali has a large proportion of foreign buyers. This perception is a legacy of the marketing done during the boom years up to 2007. The reality however is that the number of foreign buyers is low and too small to have any meaningful impact on the overall market. FNB's quarterly estate agent survey covers the 6 major metros in South Africa and aggregates the views expressed by hundreds of estate agents on what they are experiencing on the ground. The key metric that FNB derive from this survey is foreign home-buyers expressed as a percentage of total buyers.

If we consider a smoothed moving average of this data as an attempt to uncover a trend we estimate this to be 5,01% for the 4 quarters up to the 2nd quarter of 2017. This is only marginally down from the 5.28% for the 4 quarters up to the 3rd quarter of 2016. What is interesting is that foreign buyers as a percentage of total buyers was at a low of 2% in 2011 when the Rand exchange rate was at its strongest against the US Dollar and other main currencies.

Believe it or not, the Rand traded at R6.57 to the US Dollar in May 2011 - only 6 years ago. In January 2011 the Rand on average traded at R10.32 against the Pound Sterling and at R8.85 against the Euro. This gives us a clue that one of the primary drivers of foreign interest in our residential real estate is its relative cost. The FNB House Price Index expressed in foreign currency does support this and demonstrates the recent dramatic increase in the cost of our properties over the past year.

Historically the global popularity of property as an asset class has co-incided exceptionally well with the demand for our residential property from foreigners. The Knight Frank House Price Index measures this and although this index has recently climbed indicating a renewed global demand for residential real estate, there has not been the predictable increase in demand for our local properties. The widespread negative publicity in the 2nd quarter of 2017 regarding our sovereign debt credit rating and consumer and business confidence in general, can be expected to impact on foreign investment decision-making.

Cape Town has typically attracted the highest foreign home buying interest. Recent estimates place the Cape foreign buying as being at 6.77% of total buying as at the 2nd quarter of 2017 down from 8.93% estimated for the last 2 quarters of 2016. The foreign buyers originating from Africa were estimated at 31% of total foreign buyers a year ago and this figure has now been revised downwards to 25.78% of total foreign buyers. Generally for these buyers sentiment seems to have less of an impact that the relative cost of our properties.