Fewer foreigners buy South African property: FNB

Fewer foreigners are buying property in South Africa, according to the FNB Estate Agent Survey for the second quarter released today.

"... we don't believe that poor sentiment towards SA is currently a key issue," said FNB Home Loans strategist John Loos in a statement.

"Rather, weak foreign buying is more likely to be related to... a deterioration in sentiment towards the property asset class globally."

The percentage of foreign buying for the second quarter of 2011 was an estimated three percent of total local residential buying.

This was slightly up from the estimated two percent in the latter half of 2010.

"These percentage estimates are a far cry from the seven percent of early 2005 (when total market volumes were also far higher than at present), as well as from the 6.5 percent reached at a stage in 2008," Loos said.

This low proportion of foreign buyers could be due to the dramatic increase in South African home values in 2009/10, when viewed in foreign currency terms.

"Since the beginning of 2009, as the global and local economy began to emerge from recession, the rand-denominated FNB House Price Index has risen by a meagre +8.5 percent to July 2011," Loos said.

Over the same period, the FNB House Price Index in UK pound terms rose 47.5 percent, in Euro terms by 50.6 percent, and in US dollar terms by 59.9 percent.

"Is it any wonder that potential foreign buyers aren't piling into the local market? It has become rather expensive at a time when the household sectors in Europe, UK and the US also experience significant financial pressure," Loos said.

Other South African asset classes that had also risen dramatically in foreign currency terms, were still attractive to foreigners.

"Here, we believe the answer lies more in the reality that residential property as an asset class in many countries is not the 'flavour of the month' following the end of huge booms during last decade," he said.