The propensity among SA’s super-rich to splurge on big-ticket trophy homes seems to have been severely dampened by the stagnant economy, weak price growth and political uncertainty.
Estate agents in the luxury end of the housing market say negative sentiment has caused a marked slump in sales in the R10m-plus bracket.
Clinching a sale above R30m has, it seems, become a rarity. The highest price achieved across SA in the year to date is believed to be for a five-bedroom mansion with wraparound views in Cape Town’s old-money enclave of Bishopscourt. It sold for "a snip" at R41.3m.
These price levels are a far cry from the R80m-plus regularly achieved in popular Cape Town areas 12 to 18 months ago.
Industry players were expecting cash-flush buyers to return to the market after the election, but that has not yet happened.
"It has been one of the most challenging years for property, with a great deal of buyer apathy and too much fence-sitting," says Seeff group chair Samuel Seeff. "Post-election, it has been more of the same."
But it’s not only sales volumes and prices at the top end that have taken a knock — a definite shift in buying patterns has also emerged among well-heeled South Africans. Catchphrases such as "wealth whispering" and "pared-down luxury", which became popular in the aftermath of the 2008 global financial crisis, are staging a comeback. The term "micro-mansions" — no doubt a euphemism for downscaling — is also increasingly being bandied about.
Basil Moraitis, the Atlantic seaboard manager for Pam Golding Properties, says there is a definite desire among upmarket buyers in Cape Town’s high-end areas for more manageable spaces — without compromising on style, luxury and quality.
"The trend in recent years has been to create bespoke living spaces, without the hassle that comes with maintaining a large mansion set on large grounds," he says.
The micro-mansion trend has also taken off in Joburg. "Living space requirements have changed," says Richard Smith, Pam Golding Properties area manager in Hyde Park. "We are seeing more people looking to create spectacular houses on smaller properties, where there is less garden to maintain." But Smith stresses that the emphasis, more than ever, is on cutting-edge architecture, high-end fittings and finishes, security and, above all, comfort.
It’s been one of the most challenging years for property, with a great deal of buyer apathy and too much fence-sitting
— Samuel Seeff
AfrAsia Bank’s "SA Wealth Report" for 2019, released last week, tracks investment behaviour and attitudes among SA’s high net worth individuals (those with investable assets exceeding $1m). It notes a marked shift in property buying patterns, and confirms that SA’s prime housing market, typically priced above R10m, is taking strain.
Andrew Amoils, head of research at New World Wealth, which compiles the research for the report, says SA’s prime residential property market has performed poorly in recent years. Average prices have fallen by about 5% in dollar terms from 2008 to 2018.
However, the report points to a few notable exceptions, mostly in luxury housing estates including Zimbali on the KwaZulu-Natal (KZN) north coast, Fancourt (George) and Val de Vie (Paarl), where prices have increased by as much as 30% in dollar terms over the past decade.
Though the overall drop in high-end prices in dollar terms can be partly blamed on a weaker rand — it fell from R9.30/$ to R14.40/$ in the 10 years to end-December — Amoils cites other factors. Among these is rapidly rising property running costs (rates, electricity and water), which have supported the downsizing trend.
The threat of land expropriation without compensation and higher transfer duties for properties above R10m (up to 13% of the sales price) have also put a brake on demand. So, too, has the drought in the Western Cape, which has hit Cape Town’s housing market particularly hard.
In addition, new visa restrictions have made it difficult for foreign buyers to stay in SA for more than three months at a time — something Amoils believes has dampened overseas buyers’ appetite for an SA bolt hole.
The upshot is that SA’s super-wealthy decreased their real estate allocations from 33% of total assets in 2008 to 28% in 2018, according to the AfrAsia report. This makes equities the most popular investment class among SA’s high net worth individuals, at an average 30% of total assets at December 2018. Real estate follows, at 28%, with cash and bonds at 15%.
The changing dynamics, especially in Cape Town’s housing market, have resulted in some newer regions overtaking the usual suspects as high-end hot spots. Interestingly, Umhlanga, on the KZN north coast, has topped Atlantic seaboard counterparts such as Clifton, Fresnaye and Bantry Bay in the popularity stakes among the über-rich.
While Joburg and Cape Town are still home to the largest number of wealthy residents, the Durban North-Ballito-Umhlanga corridor is the fastest-growing wealth market in SA — wealth held in the area rose by 25% over the past decade, according to AfrAsia’s report.
In fact, it appears Umhlanga’s Lagoon Drive has become an even bigger magnet for wealthy buyers than Clifton’s Nettleton Road.
Amoils says prices per square metre at The Pearls, arguably Umhlanga’s most upmarket sectional-title development, are reaching upwards of R70,000/m² — similar to top-end apartments in Bantry Bay and Clifton.
Pam Golding Property Group recently sold a penthouse at The Pearls for a record R30m.
Amoils says the Cape drought has contributed to foreign and local holidaymakers choosing KZN over the Western Cape, increasing the popularity of Umhlanga. He says the trend has also supported a price uptick in areas near Umhlanga, including Ballito, La Lucia and Zinkwazi.
Other areas that have experienced stronger wealth growth than Cape Town and Joburg include the Whale Coast, with growth of 22% over 10 years, and the Paarl, Franschhoek and Stellenbosch winelands, up 21%.
But the Atlantic seaboard still has the most expensive streets in SA on a rand/m² basis (see table). Clifton, Camps Bay, Constantia and Bishopscourt in Cape Town, and Joburg counterparts Sandhurst, Hyde Park and Houghton, remain home to the highest number of R20m-plus properties — more than 80 in each.
Industry players say one upshot of softer sales of big-ticket homes has been an improvement in the luxury rental market. A number of expensive areas have in recent months achieved monthly rentals of R80,000-R140,000 — something that would have been unheard of 12 to 18 months ago, especially in Joburg.
For instance, Lew Geffen Sotheby’s International Realty recently let two Joburg properties at R140,000 a month each — a four-bedroom, contemporary masterpiece in Melrose North, and a stately, older home in Hyde Park.
The company also recently signed a 12-month lease for a five-bedroom house in Parkwood at R90,000 a month.
At Steyn City — the mixed-use golf and lifestyle estate on the outskirts of Fourways backed by insurance mogul Douw Steyn — a fully furnished property with 759m² under cover is fetching R130,000 a month. At least three other Steyn City properties are renting for more than R100,000 a month.
Pam Golding Properties achieved a record R121,000 a month for a 980m² four-bedroom penthouse at mixed-use precinct Melrose Arch.
And in Rosebank, three-bedroom penthouses with "sky gardens" at newly completed Park Central are commanding a monthly rental of R80,000.
But Park Central is not just another block of apartments, says Peet Strauss, development manager for Pam Golding Properties in Joburg. He believes the luxury high-rise in Keyes Avenue is unique in terms of its design and architecture. The building boasts a rooftop swimming pool, a concierge service and a gym.
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