Property Talk

Correct valuations of high end residential properties

The ultra-luxury residential real estate market in our world in KZN is defined by my R70m listing of an exceptional Zimbali beachfront property that has few potential rivals within the estate, the province and only has some comparatives along the Atlantic Seaboard - South Africa's undisputed headquarters of high-end residential properties. Having serviced this market for over 23 years I understand implicitly what today's ultra-rich require in a property and have seen some interesting trends develop.

The first problem that results when marketing outliers is how to value these properties. The traditional valuation methodology adopted by most professional valuers works well for the average property across any given market where sales prices follow a typical statistical bell-shaped curve.

In these circumstances the transfer history of comparatives provides a good guide to expected market value and where the homes are homogenous - such as in a sectional title development with many of the same property - defined in terms of floor plan and finish detail replicated

In economics, they taught us about "snob-appeal". The intangible aspect of the value created for a certain class of buyer of a good or service that is considered superior because of its price or associated with other people or products that are considered desirable. Certain areas are extremely aspirational for many people because of the celebrities that own homes within the area.

Beverley Hills in California is a great example internationally and Zimbali Coastal Resort closer to home. Correct valuations of high end residential properties have to carefully consider position, architectural and interior design, build and finish quality detail, the time factor of being able to get a home to that level, professional fees, and immediate neighbours and proximity of other homes.

Very rarely are these properties bonded making a commercial bank's opinion of value in these cases irrelevant. Is my R70m listing worth it Ofcourse it is to the informed buyer who can afford it.

For modern ultra-high-net-worth individuals the ability to escape from the public domain and from the eyes of the media or general public is something of great value. Privacy is the new luxury for these people and a residential property would have to reflect that understated elegance.

Another important aspect is design. Architectural integrity and interior design are aspects that will define a high-end home and either make or break the desirability and the eventual price of the property. Great architecture is harder to find than what you would typically expect and for this reason the top architects are sought out by high-end home builders.

Similarly good interior designers add significant value to a property by accentuating great architecture and create a seamless integration of the spaces by using materials and colours that are instantly desirable. They have the ability to see the detail in every aspect of the home. Once they are done the home becomes an exceptional living space rather than a building.

This single fact is completely missed by the majority of developers who often fail to understand what drives value in the buildings they create and that people are not buying four walls and a roof but spaces that have the potential to add value to their lives and create amazing memories.

Size matters but not as much as it used to, or will in the future. Convenience and ease of living have become more important. Mobility and the ability to instantly connect with almost anybody on the planet has changed the way high-end property owners view these assets. They would rather own several smaller ultra-luxury homes in different locations around the world than one large palace. This makes perfect sense from an investment point of view.