The weak rand is adding fuel to the SA luxury property purchasing fire as high net worth investors turn to bricks and mortar as a store of value.
“With the rand exchange rate still at more than R11 to the US dollar and around R15 to the euro, even after last week’s rate hike, local investors who are trying to protect their wealth are hurrying to buy property,” says Lew Geffen, chairperson of Sotheby’s International Realty in SA.
In fact, he says, they have been doing so for some weeks, since the devaluation of the Argentinian peso and the Turkish lira sparked a loss of confidence in emerging markets and a major sell-off that has only worsened with news of weaker Chinese manufacturing, political turmoil in Thailand and the platinum strike in SA – and is likely to keep currencies like the rand under pressure.
“They know that property is much more likely to retain its value than cash in such situations and their moves to protect their assets against depreciation have added further impetus to the top end of the residential property market, which has in any case been performing well for the past year.”
Examples of such purchases, Geffen says, include a property in Sandhurst recently sold for R20-million to a Johannesburg executive and an Atlantic Seaboard house just sold for R50-million, also to an SA buyer.
“At the same time, however, the lower rand exchange rate has resulted in an increase in overseas buyers who are now able to acquire much more property with their dollars, euros and pounds than they could have a year ago.
“This is especially evident on the Atlantic Seaboard, where we daily receive enquiries from European buyers, in particular, who have already exchanged their currency and are ready to buy just about anything priced at under R5m – which equates to about €350 000 at the moment.”
As part of an international group, he says, Sotheby’s International Realty is also seeing a trend for offshore money to make its way back to SA to be invested in local property.
“This is money that local investors or expats hold in offshore accounts and which currently attracts very low rates of interest.
“Many of these investors are now taking the opportunity to channel this money into SA property, where they currently stand to make returns of at least 6 to 10% that they are free to take out of the country again if and when they resell.”
Popular choices for such investors, he says, are resort and retirement areas such as the Cape West Coast, the Garden Route and the KZN North Coast.