Cape Town market proving popular with foreign property buyers, report suggests:
The residential real estate market in Cape Town, South Africa, is currently a classic buyers’ market in with properties taking 19 weeks on average to sell and then with only 15 % of vendors achieving their asking price, a new report reveals.
This is good news for foreign buyers who account for almost 7% of total sales, by far the highest proportion of sales in any South African city, with the British a prominent force, according to the Cluttons South Africa first quarter 2011 report.
It reports a lengthening in the average time homes spent on the market before selling, from 15 weeks and six days in the fourth quarter of 2010 to 19 weeks and one day. Nevertheless, in Cape Town, the occasional big high price sale has supported confidence, even through the market’s toughest period, it shows.
Over 80% of properties in Cape Town sold for over R6 million (£550,000) were to cash buyers. City Bowl and Atlantic Seaboard properties have fetched biggest prices. Between June and December last year the average price of apartments in the City Bowl, where 327 apartments were sold last year, jumped 15.2% to R1.53 million (£140,000).
The Cluttons South Africa report added that since the bottoming out of the recession in 2009 when market values had dropped in most areas by 12 to 15%, there has been a marked increase in property transactions in the lower end of the market, R1 million to R4 million (£90,000 to £365,000) and in the upper end where prices are R10 million (£900,000) plus.
It says that the lower end has benefited from the loosening of banks lending criteria and the upper end records most sales as cash sales. This is particularly true for British buyers, where cash is used or borrowed from UK banks at interest rates far below those currently available in South Africa.
‘British buyers can benefit from substantial discounts by shopping around. It is important to look for quality and prime locations,’ said Jacques Ellis, managing director, Cluttons South Africa.
The prime areas in Cape Town are the Atlantic Seaboard and the Constantia Valley. The Atlantic Seaboard includes the V&A Waterfront, Green Point, Sea Point, Fresnaye, Bantry Bay, Clifton and Camps Bay, the last four being the most prime and expensive areas. Hot spots in these areas are Upper Green Point and Upper Sea Point. Value can still be had in these areas with many properties being fully renovated or demolished and rebuilt either as single family homes or small blocks of apartments, according to Cluttons.
In Constantia Valley, the prime areas include Bishops Court, Constantia, Upper Constantia and Steenberg. All of these areas have potential and offer larger homes with excellent views of False Bay. There is a large number of estates around Steenberg that are near the best schools, the report adds.
Most of the appeal for the British buyer is that English is the most widely spoken language, the over night flights to the city are easy and have just a one hour time difference. Also, compared to popular Mediterranean destinations, prices for similar properties are up to 50% less.
‘The British have always been a prominent force in the purchasing of properties in the Cape region. We have recently concluded a number of sales to British buyers in the R5 million to R18 million range (£450,000 to £1.6 million). We also feel that the bottom of the market has been reached and the middle and luxury end of the market offers substantial opportunity for price increases over the next few years,’ explained Ellis.
The report also points out that it is straight foward for foreigners to buy in South Africa. There are no restrictions. The property laws are very strong and follow Roman Dutch Law. You may borrow 50% of the purchase price in rand from a local bank; the remainder needs to be brought in. There is no restriction on taking funds out again or profit from a property as long as all the forex rules are followed. There is capital gains tax of 10% on property, quite low compared to other countries.