More South Africans in big league

Their vast fortunes have allowed them to invest in artworks, luxury holiday homes, game farms, private yachts and shares in some of the country's best-performing companies. Simpiwe Piliso reports

Despite the recession and its aftermath, more South Africans have investment portfolios worth over $1-million, according to independent global property consultancy Knight Frank's latest Wealth Report.

More than 96000 South Africans have "investible assets" - which include their private artworks, but exclude primary residential homes - worth more than $1-million, according to the 2010 Wealth Report.

The researchers excluded primary residences in their calculations, but included wine estates, game farms, and properties which the dollar millionaires use to generate income and long-term investments.

The report - which monitored super-rich individuals in 43 countries - also shows that South Africa boasts among Africa's largest population of super wealthy individuals, defined as those whose personal financial wealth ranges between $1-million and $10-million.

Last year, another report, the World Wealth Report, compiled by Merrill Lynch and Capgemini, the multinational financial services groups, showed that more than 4 345 South African dollar millionaires had lost their elite status in the country's super-rich club.

It found that the recession had led to the number of dollar millionaires in the country plummet from 55 047 to 50 699 in 12 months.

However, the report only took into account individuals' private investments and shares, and excluded artworks and private homes.

Knight Frank's 2010 Wealth Report includes artworks, which, according to Johannesburg-based art dealers, amount to far more than R2-billion.

Three years ago, art dealers estimated that the value of private and corporate collections in Johannesburg alone could amount to more than R2-billion.

Knight Frank's report also reveals that despite the global financial crisis last year, millionaires were still eager to invest in property ranging from commercial to luxury villas for their investment property portfolios. Its statistics are gleaned from 207 offices in 43 countries and from the handling of more than of £594-billion worth of annual property sales and management deals.

"High net-worth individuals have a fondness for tangible assets, with property making up the largest share of their investment portfolios," the researchers point out.

The report - which covers the 12 months between January and December last year - shows that a growing number of South African entrepreneurs had taken advantage of the credit crisis and plummeting house prices by snapping up prime property estate at a fraction of the cost a few years earlier.

Thanks to their property portfolios, these new millionaires have joined the ranks of the country's super-rich, such as property moguls Tokyo Sexwale and Sisa Ngebulana.

As early as 2002, politician-turned-billionaire Sexwale splashed out a reported R15-million for a 10ha wine farm, Oude Kelder, in Franschhoek. Five years later, Sexwale, who is now minister of human settlements, forked out a reported R56-million for a mansion in Sandhurst, northern Johannesburg.

And the following year, in 2008, he was negotiating to buy a 35ha Mozambican island resort. The Quilálea Island Resort is nestled in Quirimbas Archipelago, in northern Mozambique.

Ngebulana, a Mthatha-born property developer and owner of Billion Group, has invested in about three developments in Eastern Cape that are worth about R5-billion.

Billion Group owns East London's R500-million Mdantsane City Mall, the R1.6-billion Hemingways Mall and a R1.5-billion luxury golf estate, the Sinati Coastal Golf Estate.

Ngebulana also has interests in more than 45 registered companies, ranging from construction to finance.

Scores of investors and entrepreneurs are taking Ngebulana's lead, although small emerging construction and property development companies suffered last year as the number of projects and contracts dwindled considerably due to shrinking global and domestic demand.

As a result, these companies - which according to Statistics South Africa employ some of the 430000 people in the construction industry - are now competing for fewer construction contracts.

But things could slowly change as wealthy investors plough their fortunes into commercial property.

According to the Wealth Report, many wealthy investors have returned to commercial property markets, "given the buzz word around the sector".

Liam Bailey, head of residential research, said these investors were the globe for prime property to add to their portfolios.

The global credit crunch, according to the report, has "encouraged the wealthy to move investments out of cash and into property (mostly top-end residential) in the search for acceptable yields. This has driven demand for property higher and, set against tight supply, has served to push values upwards in many (top-end) locations".

Bailey commented: "Residential investment makes a lot of sense over the long term. Most high net-worth investors tend to cluster around the best locations in the world."

Last year, Business Times reported that foreign investors were discreetly hunting for houses in some of South Africa's most exclusive suburbs.

The demand led to more than 3290 luxury apartments and mansions being built on subdivided properties in nine of the country's most sought-after suburbs since 2007.

The favoured suburbs were Clifton, Camps Bay, Bishopscourt and Constantia in Cape Town; Sandhurst, Hyde Park and Westcliff in Johannesburg; Waterkloof in Pretoria; and Umhlanga, north of Durban.

Research provided by The Knowledge Factory, which compiles the SA Property Transfer Guide, also showed that a total of R6.2-billion worth of residential property sales in these suburbs were recorded between January 2008 and July last year.

In addition, more than R845-million worth of homes were bought in these areas in just seven months last year, and one in three homes that were priced at more than R2-million were bought for cash.

"While the names may differ, the desire by high net-worth individuals to own and invest in the best property is ubiquitous around the globe," said Andrew Shirley, editor of the 2010 Wealth Report.

According to local estate agents who operate in top-end suburbs, many of the wealthy property hunters don't even haggle about the prices.

Rise in home ownership

SOUTH Africa's property market is well on the road to recovery, according to the RealNet Estate Agency Group.

Chief executive Tjaart van der Walt said: "The value of sales in our network over the first four months of 2010 was 80% higher than during the same period of 2009 ... and there are many other positive indications of further market improvement as the year progresses."

He said these include lower household debt levels, lower inflation and the lowest interest rates in many years, all of which are making home ownership more affordable for more people.

"In addition, the government's recent announcement of a R1-billion mortgage guarantee might break a long-standing log jam that has prevented much of the huge housing demand at the lower end of the market from being translated into sales."

The R1-billion guarantee fund stands to benefit people who earn between R3500 and R9000 a month, and who do not qualify for financial help from banks. The fund will be offered to banks as a guarantee to lend to this market.

Cup drains home owners

THOUSANDS of homeowners, who renovated their properties in the hope of renting them out for the World Cup, have failed to score even a cent.

"The hype surrounding potential property rentals to rich tourists for the World Cup has left many property owners out of pocket," according to Tenant Property Network, a registered property credit bureau.

Managing director Michelle Dickens said: "The World Cup has presented a fantastic opportunity for many South Africans. However, there are numerous property owners who have lost between R30000 and R50000 on renovations to their properties which they will not recoup.

Holiday homes back in favour

SECOND homes are making a comeback.

Estate agents, mostly along South Africa's 2500km coastline, are starting to cash in again after a dry spell triggered by the recession and credit crunch.

Several large agencies, with offices in popular holiday destinations, this week said that the time was right to purchase a holiday home because of a larger inventory and favourable prices.

Prices for modest holiday homes range from R600000 to over R10-million for palatial estates.

"There's a strong appetite for homes below R1-million ... as well as an increased demand mainly up to the R2-million mark," said Terry Cousins of Pam Golding Properties in Amanzimtoti in KwaZulu-Natal.

Her office recently sold several holiday flats in the R600000 price range.