Please note that you are using an outdated version of Internet Explorer which is not compatible with some elements of the site. We strongly urge you to update to a newer version for optimal browsing experience.

New visa requirements hit Cape Town's property market

14 Oct 2015

Sales to foreign buyers across Cape Town’s Atlantic Seaboard and City Bowl are down by more than 30% year-on-year despite the more attractive pricing facilitated by the slump in the value of the rand against the pound sterling, euro and dollar.

This apartment in Sea Point, Cape Town, has two bedrooms. It is selling for R3.595 million - click here to view.

This is according to Ian Slot, Seeff’s managing director for the Atlantic Seaboard and City Bowl, who says it seems to mirror the reduction in tourist numbers, and one has to assume there is a correlation between the two.

“Our experience has almost universally been that foreign buyers make the decision to buy when they are actually in Cape Town, so if they are not here they are less likely to buy.”

Cape Town Tourism CEO, Enver Duminy has also announced that research points to a direct correlation between the drop in visitor numbers and the introduction of the new travel regulations.

Slot says it seems sales to foreign property buyers are following suit, and  a definite trend can be observed.

“We started the year off with activity much on par with last year, and suddenly from about April or May onwards we observed a notably downward curve in sales to foreign buyers.”

The Atlantic Seaboard and City Bowl top the list for foreign buyers looking for second homes on the continent, comprising of about 20% to 30% of the sales activity for these areas over the last two years. The estimated loss in turnover could be as high as half a billion for this year, he says.

Set on a double-sized stand in Camps Bay, Cape Town, this property has four bedrooms, entertainment areas and an alarm system. It is on the market for R16.9 million - click here to view.

With the rand down by about 15% against the pound and dollar, it follows that American, European and UK buyers especially should see property on the Atlantic Seaboard as offering excellent value right now. Yet, instead of a healthy uptick, a notable decline is evident.

Only 112-odd properties have sold to foreigners this year, as at end August, 37% fewer compared to the 152 sales for the same period last year. Only 7 out of 27 sold have been R20 million-plus trophy homes.

Slot says sales to UK and European buyers, traditionally the biggest investors, is down by over 40% while Americans have bought 50% fewer properties this year. Where German buying had been increasing until early this year, it has now more than halved. Even sales to African buyers, for example, Nigerians, are down by 50%.

In Camps Bay, sales to foreigners is down by about 50%, so too in the high-density apartment areas such as Green Point, Sea Point and surrounds, while sales in the CBD is down by over 60%.

Slot says Seeff expects a similar decline in the demand for holiday rentals from abroad. With the high tourist season fast approaching, there is no doubt that fewer foreigners are likely to book a sought-after rental on the Atlantic Seaboard this year.

This three bedroom apartment in Clifton, Cape Town, offers open-plan living areas and a patio. It is priced at R12.95 million - click here to view.

This is concerning for buy-to-let investors who may have hoped to cash in on the improved tourist arrivals evident over the last 18 months, especially given the weaker position of the rand, says Slot.

He says from an economic point of view, they see the pressure on the tourist arrival numbers as disappointing, especially in view of city’s efforts to actually grow this vital economic sector to bring more visitors and cash flow into the city and country. Tourism brings jobs and progress, even in the property sector, says Slot.

A drop in property sales means less transfer duty and other taxes. Foreign buyers also often improve their properties, and this is just part of an economic value chain affected by this development.

“Nonetheless, those who do manage to visit the country over the summer months are likely to be swayed to invest in property given the good value that their pounds, euros and dollars can now secure for them,” says Slot.
Print Print
Top Articles
With a glut of rental property and flat growth in high-rent provinces, it’s a renter’s market. KZN showed rental growth above the national average, get the lowdown…

These apartments in new developments in Cape Town’s Observatory, Oranjezicht, Sea Point, Claremont Upper and more, offer a great lifestyle close to amenities. Take a look...

Fancy living in one of South Africa's prime residential estates, with a top-class golf course on your doorstep? Here are the best courses and what you'll pay for a home...

Loading

Your browser is out of date!

It looks like you are using an outdated version of Internet Explorer.

If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.

For the best browsing experience, update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.


Please contact our Property24 Support Team for further assistance. Tel. +27 (0)861 111 724