Global property hotspots

Cape Town isn’t the only city where a multiyear housing boom turned to bust last year. A slowing global economy, ongoing geopolitical tensions, rising property taxes and a surplus of luxury homes for sale weighed on price growth in a number of upper-end neighbourhoods across the globe, international property group Knight Frank reveals in its latest annual "Wealth Report".

In fact, the 100 cities that Knight Frank tracks in its prime international residential index achieved average house price growth of only 1.8% last year. Though that was up marginally from 1.3% in 2018, it’s still some way off the 2.8% in 2013, and the 5%-plus recorded prior to the 2008 global crisis.

Knight Frank’s index focuses only on upper-end suburbs, where high net worth individuals would typically buy homes.

Cape Town, which recorded a price drop of 1.5%, clocked in at No 88. Other global property hotspots where prices fell last year include London, New York, San Francisco, Cannes and Saint-Jean-Cap-Ferrat on the French Riviera, Dublin, Dubai and Rio de Janeiro. Vancouver was the worst-performing housing market in 2019, with a drop of 8.3%.

We continue to see strong interest and a rising uptake in Portugal — specifically Lisbon and Porto
— Chris Immelman

Kate Everett-Allen, head of international residential research at Knight Frank, says a weaker rand and slowing economy influenced Cape Town prices, while Vancouver continued to feel the impact of government policies aimed at achieving affordability and stability. Many buyers and sellers in these markets adopted a "wait-and-see" approach, she says.

The top-performing housing markets in the world last year were dominated by European cities, including Frankfurt, Berlin, Lisbon and Athens, all of which achieved price growth of between 6.3% and 10.3% (see graph). Cyprus also staged something of a comeback, with growth of 4.3%.

Interestingly, it seems that the housing markets of Lisbon, Athens and Cyprus have been supported by the rising popularity of citizenship or residency-by-investment (RBI) schemes. These allow foreigners to obtain EU residency, and eventually a second passport, if they buy property in these countries.

Portugal’s "golden visa" programme has proved particularly popular among SA investors looking for a hedge against economic and political uncertainty in their own backyards.

Chris Immelman, who heads Pam Golding International, says the property group has placed more than 300 SA families in Portugal’s golden visa programme since 2014.

"We continue to see strong interest and a rising uptake in Portugal — specifically Lisbon and Porto," he notes.

Though the initial requirement for Portugal’s RBI scheme was a minimum property investment of €500,000, this was recently reduced to €350,000 — a level that, of course, makes it far more accessible to South Africans. Immelman says residency is achievable in year six and citizenship in year seven.

Residency enables applicants to live, work and study in Portugal, with travel rights in the Schengen zone, while citizenship allows applicants and their immediate family to live, work and study in any EU country.

However, Knight Frank’s "Wealth Report" sounds a warning to investors keen to cash in on the growing number of RBI schemes on offer across the globe (Italy and Egypt are apparently the latest countries looking to introduce incentives for foreign property buyers).

Nadine Goldfoot, of international immigration law firm Fragomen, is among the analysts in the report cautioning investors on RBI schemes. She says the route to accessing RBI opportunities will become more complex, given the heightened focus in many parts of the world on transparency, and perceived immigration risks from third-party countries.

"At the end of 2019, America’s [immigrant] investment programme was shifted from US states to the federal government and, while not dead, it is ailing. Similarly, in early 2019, the European Commission publicly criticised Cyprus, Moldova and Malta for the laxness of their RBI programmes, leading Moldova to cancel its scheme," says Goldfoot.

The report says tighter regulation is common in many property markets. Last year New Zealand — tired of being seen as a billionaire’s apocalypse-survival haven — made moves to severely restrict the ability of foreigners to buy land or existing homes.

Industry players expect continued tension between heightened demand for RBI programmes on the one hand and greater scrutiny and tougher reporting requirements on the other.

Even "clean" money is being chased out of some countries due to differing standards for paperwork — an issue for high net worth individuals from emerging markets in particular. "Those hoping for access to the Schengen zone, particularly from countries with more informal economies, need to keep an eye on Brussels’s evolving policy on RBI," says the report. "They may also want to consider alternative destinations like Thailand, Malaysia and the United Arab Emirates as Europe and America tighten their requirements."