The number of foreign investors buying residential property in South Africa has dwindled noticeably.

FNB’s latest Estate Agent Survey shows that foreign buying represented only 2% of total housing sales in fourth quarter 2010, the lowest level on record since the FNB survey was launched in 2002.

FNB property strategist John Loos says in 2008 and 2009 some 4% to 5% of all housing sales still went to foreign buyers. Loos cites the global recession and ongoing financial stress in many parts of the world, Europe in particular, as a key reason for the drop off in foreign demand.

Currency fluctuations also play a part. Says Loos: “The UK has traditionally been a major source of foreign buyers for SA. And a significantly weaker pound, coupled to a stronger rand, means British investors are now getting less house for their money than a year or two ago. Residential property has also lost favour globally as an asset class.”

Loos says this trend is supported by FNB’s figures on non-essential property buying, which show an ongoing decline of all forms of second-home buying (buy-to-let, holiday homes and buying for relatives) in 2010. For instance, holiday home buying as a percentage of total sales dropped from 2,5% in 2009 to 1,5% in 2010.

Loos says the fact people continue to put second-home purchases on the back burner is a reflection of the tough economic and financial times in which the world still finds itself. “Weak capital growth prospects also make investments in second homes unattractive from a more speculative point of view.”

Pam Golding Properties (PGP) has also reported a noticeable drop in demand from foreign buyers. Cape Town’s V&A Waterfront, traditionally a popular investment destination for offshore investors, is a particular case in point.

PGP agent Paul Levy says while a number of initial purchasers at the Waterfront were foreigners, some of these owners have in recent months opted to sell their investment properties on the back of the global downturn. “The result is that the owner profile at the Waterfront is shifting, with a much higher take-up by local buyers who have been waiting for the right property at the right price.”

Levy says sellers who have pitched their prices realistically for the current market conditions are generally achieving very good returns on their initial investment. Some 21 apartments have apparently changed hands in the Waterfront in 2010, ranging in price from R2,7m to R14,5m. - property24.com

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Home sellers expecting too much?

Limited access to finance and the affordability of homes are hampering property sales according to South African estate agents who claim that the extensive number of available properties are making buyers more discerning.

Samuel Seeff, chairman of Seeff Properties says that buyers are currently “in the pound seats” although many sellers are still trying the get prices that were last seen in 2007 when the property market was buoyant.

He says that if sellers are still expecting to achieve the 2007 price levels then the house is likely to be on the market for a long time and the number of offers will be limited and certainly below the 2007 levels.

Berry Everitt, chief executive of Chas Everitt International Properties says the average drop in price required to achieve a sale is around 12 percent, indicating that most sellers are expecting too much for the property they have on the market.

Everitt says that because there are so many properties on the market at this point, many buyers will not even consider making an offer on a property that is over-priced and will move on to something that is more realistic.

Homes that do not attract any interest after several weeks on the market are, according to Everitt, possibly over-priced and the seller should consider dropping the price to increase interest in the property and attract offers on it.

In a newsletter produced by Pam Golding Properties, the company points out that the property market has show a 30% improvement in sales volumes for the year to date but the limited access to credit is preventing even more sales from being finalised.

“This means that, in the present market, correct pricing of properties is more critical than ever as buyers are faced with affordability issues and have a good selection of properties from which to choose,” says the newsletter.

Everitt concedes that many sellers have the view that buyers are at liberty to make any offer on a property but he says that sellers must now appreciate that most buyers are well informed when it comes to property prices and know what homes in a particular area are selling for.

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CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

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