Luxury property cooling its heels
Sales of luxury properties have been few and far between over the last year. Buyers are in a picky mood, looking for bargains before shelling out cash.
And cash has been king, with most properties at the top end of the market being bought with relatively little loan financing.
Linda Erasmus, CEO of Fine and Country SA, says distressed properties in the luxury market are unusual and there are few bargains to be had.
"People are putting that big purchase on hold. The dream eight-bedroom, eight-bathroom second homes are now sitting on the market with little or no response."
With a mean valuation of R16.3-million, Clifton in Cape Town tops the list of South Africa's luxury suburbs, ahead of Chiselhurston in Johannesburg, Sandhurst (Joburg), Bantry Bay (Cape Town), Steenberg Estate (Cape Town), Llandudno, Westcliff (Joburg), Bishopscourt (Cape Town), Hyde Park (Joburg) and Pezula Private Estate (Knysna).
Of these top 10 suburbs, only Clifton, Llandudno, Westcliff and Hyde Park have, on average, experienced price growth since the beginning of this year.
The recession has led to the rise of "contender suburbs", where buyers look for trade-offs and a better chance to make a profit. The luxury segment (roughly R3-million to R12-million) is the only residential market where average values are still slipping.
"False Bay is an example of a contender area," said Erasmus, "although the Atlantic seaboard perennially attracts affluent buyers, with Bantry Bay and Clifton seen as desirable areas for international and Johannesburg-based buyers. The Capetonian market is attracted by the family homes in Upper Green Point, Fresnaye and Camps Bay, which all benefit from wonderful sea views and close proximity to the city centre."
Andrew Golding, chief executive of Pam Golding Properties, said: "The Western Cape enjoys relative stability with limited stock and high demand. Areas such as the southern suburbs, Atlantic seaboard and City Bowl are sought after and generally considered low-risk areas by the banks in regard to mortgage loans.
"There is excellent value in Fish Hoek. In the Boland, Franschhoek remains highly desirable and Riebeek Valley is like the 'new Franschhoek', with a great deal of interest from the Netherlands. Pringle Bay still attracts the who's who from Cape Town."
Greeff Properties' Marion Taylor added: "Given the geographical limitations of the Cape peninsula, the historically popular suburbs retain their popularity and value. Bungalows in Clifton, Glen Beach and Bakoven traditionally achieve the highest prices per square metre.
"There has been a great deal of development on the West Coast - a fairly new phenomenon as until fairly recently Capetonians purchased holiday homes up the east coast towards Hermanus."
Greeff Properties CEO Mike Greeff said his agency had moved properties in the R30-million to R45-million in Clifton, Constantia and Bishopscourt.
"There's a long wait to sell expensive properties," said Greeff. "We're seeing a 20-week selling period on average, with some properties taking up to a year. Buyers are cautious. Simon's Town, Kalk Bay and Wembley in the Cape Town CBD, as well as Somerset Road in Green Point, are some contender addresses. For holiday homes, Grotto Bay, Pearl Valley, Hermanus, Knysna and Plettenberg Bay are sought after."
Herschel Jawitz, chief executive of Jawitz Properties, said changes were taking place in Johannesburg.
"Inanda is challenging Hyde Park, Sandhurst and other top areas as a premium suburb. Hyde Park and Sandhurst are both making a transition from old to new money, featuring a lot of CEOs who are still only in their 40s - those who have made a lot of money in the last 10 years. Westcliff remains a typical old-money suburb."
New or old, it takes a lot of money each month to run one of these homes.
Andy Todd, MD of Seeff Southern Suburbs and Constantia, said although most high-end properties are bought with cash, there are still some big bonds to be found. "A recent example was a bond for R8-million, with repayments of around R80000 per month - requiring a monthly joint income of around R200000 or more. A major problem with these bonds is that most upper-end buyers are self-employed and banks are more reluctant to give bonds for these clients."
Most high-end buyers find their own finance, usually from private banks. "There are no 100% bond approvals in luxury suburbs, no matter who the buyer is. We did see one property of R37.5-million paid for in cash," said Greeff.
"Surprisingly, in the leisure end of the market, some of the golf and eco-estate owners have been under more pressure to sell than we'd expect," said Jawitz. "We're seeing more assisted sales and properties on the repossession list in various estates."
In KwaZulu-Natal, the Umhlanga-Ballito area is fast becoming the Sandton of Durban.
"The Umhlanga area is very desirable for home buyers, businesses and holidaymakers. It is an eclectic mix of quaint village, growing business hub, the world-class Gateway shopping mall, and access to some of the best golf courses in the country," said Golding.
Foreign buyers seem to have eyes only for coastal hot spots.
"We courted potential foreign visitors to provide them with rental accommodation during the World Cup.
''There were a few instances where some of these enquirers, who engaged us looking to rent, ended up purchasing, but in the main that was not the case," said Ian Slot, MD of Seeff Properties for the Atlantic Seaboard.
"As we had anticipated, the spin-off of the World Cup was relatively low," noted Samuel Seeff, chairman of Seeff Properties. "My view is that we will start to see real benefits down the line.
Golding said that SA offers a compelling property proposition. "Historically our property market has provided good average capital growth (10%-15%) and we believe it is still undervalued in world terms."
South Africans still have a yen for buying foreign property, but finance is not easy to come by.
"The UK is still a very attractive destination, offering good value right now," said Jawitz.
"But South Africans are hesitant; it's tough to get funding as a non-resident, which necessitates having cash on hand. Mauritius is a good destination, offering the bonus of residency status and 'semigration' thanks to being part of SADC, as well as the lack of exchange control regulations that make properties in the UK, for example, such a hassle," he added.
Greeff said the Seychelles, Mauritius, the south of France, London and Spain are all popular with South Africans, although purchases in all these areas have slowed.
"Malta is one of the recent hot spots discovered by South Africans," added Erasmus.
Jawitz also noted a trend towards prime apartment blocks, such as Sandton's Michelangelo and Melrose Arch.
These are SA's premier street addresses:
- Coronation Road in Sandhurst;
- Pallinghurst Road in Westcliff;
- Nettleton Road in Clifton;
- Klaassens Road and Upper Primrose Avenue in Bishopscourt;
- The Avenues and Dawn Avenue in Constantia;
- Victoria Road (especially the sea side) in Clifton;
- Lagoon Drive, Marine Drive, Forest Drive and Chartwell Drive in Umhlanga;
- Canopus Street and Victoria Street in Waterkloof Ridge, Pretoria;
- Cabriere Street in Franschhoek;
- Val de Vie Wine & Polo Estate, Franschhoek;
- Beachyhead Drive in Plettenberg Bay;
- Milkwood Drive, Cherrywood Lane and Tinderwood Loop in Ballito;
- Ocean View Drive in Bantry Bay;
- Thesen Island in Knysna;
- Forest Drive in La Lucia.