It’s not only jittery South Africans who are seeking bolt-holes abroad. While local emigrants are hoping to escape economic, political and currency risk, a record number of affluent families across the globe are moving countries in a bid to avoid fallout from the war in Ukraine.
Wealth migration specialist Henley & Partners and research firm New World Wealth estimate that 122,000 dollar millionaires will relocate to new countries this year.
That’s based on year-to-date migration numbers, which show a hefty 46% year-on-year increase. The 2023 forecast, available in this year’s Henley Private Wealth Migration Report, is also comfortably ahead of the pre-Covid high of 110,000 in 2019.
The survey only tracks the movement of high net worth individuals with investable assets of more than $1m. Still, it is a reliable indicator of broader migration trends.
Australia, the United Arab Emirates (UAE), Singapore, the US and Switzerland are expected to be the top five destinations for net inflows of high net worth individuals in 2023.
Juerg Steffen, global CEO of Henley & Partners, says the surge in wealth and investment migration must be seen against the backdrop of multiple crises that have hit the world since early 2022. The Russia-Ukraine war, conflict in Africa, a spike in interest rates, soaring inflation, looming recessions, political turmoil, volatile stock markets and climate change have all spooked the wealthy, he says.
“There is a growing interest among affluent citizens in every part of the world to explore alternative places to live in a bid to protect their families and wealth from potential risks,” he says.
Political stability, low tax rates and personal freedom have always been key factors influencing millionaires’ decisions about where to live. But Steffen says the wealthy these days also want to ensure their children have access to top schools, universities and future jobs.
Australia’s allure as a wealth hotspot is partly due to its points-based immigration system, which favours wealthy individuals and those with professional qualifications.
Of course, the country’s warm weather, beautiful beaches and relaxed, outdoor lifestyle also help. Moreover, Australia has excellent health-care and education systems, and boasts one of the best-performing economies in the world over the long term.
Steffen says the UAE’s growing popularity among the super-rich, particularly post-Covid, has much to do with its highly diversified economy, business-friendly policies and low tax rates.
On the flipside, the UK — traditionally a magnet for the world’s wealthiest — is expected to be one of the five biggest losers when it comes to the outflow of high net worth individuals in 2023. The other four are China, India, Russia and Brazil.
The UK’s reputation as a prime migration destination started fading about six years ago. From 2017 to 2022 it lost about 12,500 more high net worth individuals than it gained through migration. The country is expected to lose another 3,200 millionaires to migration in 2023. A key reason appears to be Brexit, which has prompted a move to the EU.
The introduction of a more onerous tax regime and hefty estate duty rates have deterred wealthy retirees in particular. Other concerns include the country’s deteriorating health-care system and personal safety rate — especially in the big cities.
According to Steffen, the shrinking importance of the London Stock Exchange — which has attracted fewer new listings and showed slower overall US dollar price growth over the past few years — could also play a role.
Unsurprisingly, South Africa, too, features among the countries where increasing numbers of wealthy residents are jumping ship. It ranks ninth among the 60 countries tracked by the survey in terms of the outflow of high net worth individuals.
Worryingly, Henley & Partners and New World Wealth expect the net outflow — the difference between millionaires returning and leaving South Africa — to increase by 25% year on year in 2023.
Wealthy people are extremely mobile and they therefore tend to be the first to move when the need arises. The middle class often follows suit later
— Andrew Amoils
New World Wealth head of research Andrew Amoils points out that millionaire migration figures can be a telling real-time barometer of the health of an economy.
“Wealthy people are extremely mobile and therefore tend to be the first to move when the need arises,” he tells the FM. “The middle class often follows suit later.”
According to Amoils, South Africans are seeking greener pastures as a result of the energy crisis, poor municipal service delivery, collapsing critical infrastructure, the lack of new business opportunities, high unemployment and a failing education system.
South Africa’s official greylisting by the Financial Action Task Force in February is another likely concern, as it could affect the country’s ability to have access to international capital markets and lead to increased scrutiny from financial institutions and regulators.
Changes to the South African Revenue Service’s tax rules regarding foreign investment and emigration are also likely to affect those looking to take money out of South Africa.
Still, there is one bright spot: several of the South Africans who live and work in the UK could return to home soil over the next two years. Amoils believes this is likely, given the UK’s loss of status as a prime global wealth destination.
The numbers are not insignificant: 50,000 South Africans live in London alone.
Amoils believes the Western Cape is likely to be a major beneficiary of this reverse migration trend due to its reputation as South Africa’s best-managed province from a local government perspective, relaxed lifestyle options and scenic coastal surrounds.
In fact, estate agents in the province are already reporting a marked uptick in property sales to returning expats.
The number of foreigners buying property is also on the rise, especially in Cape Town. Estate agents are reporting an uptick in European buyers — notably from Finland — looking for a summer escape that’s far from the Ukraine war.
Ross Levin, licensee for Seeff Atlantic seaboard and city bowl, says there’s no doubt that Cape Town is back in vogue among foreign buyers. Apart from the rise in Finnish investors, who share a border with Russia, most of the interest comes from Germany, the UK, Switzerland and France.
The group estimates that 30% of all sales on the Atlantic seaboard are now going to offshore buyers.
According to Levin, foreign investment in the city’s property market has been further supported by a strong rebound in international tourists.
Latest Wesgro numbers show that international passengers arriving at Cape Town International Airport surged 90% from January to April year on year.
“Everybody now wants to be in Cape Town — buyers and sellers alike,” says Levin.
Pam Golding Properties CEO Andrew Golding believes the Mother City’s growing stature as an emerging tech and call-centre hub has helped put it back on foreign radars. The property group has in recent months fielded a marked increase in inquiries from fintech professionals from the UK and the US in particular who are planning to relocate to Cape Town, he says.
Golding refers to a recent Savills report on the world’s top tech cities, in which Cape Town features as a key emerging centre, along with Nairobi and Lagos.
And a recent global market comparison by international commercial real estate firm Cushman & Wakefield ranks Cape Town among the top 10 global markets to watch as data centre locations, alongside smaller coastal cities such as Auckland as well as the Patagonia region of Chile and Argentina.
Everybody now wants to be in Cape Town — buyers and sellers alike
— Ross Levin
Cape Town’s CBD has been a beneficiary of the trend. “The city centre has in recent years transformed itself into a vibrant mixed-use destination of choice for businesses, investors, residents and visitors alike,” says Golding.
“It offers connectivity not only in terms of technology, but also in providing access to a great lifestyle from a health, work, leisure and entertainment perspective,” he adds.
Cape Town’s value proposition is another major drawcard. Golding says high-end property buyers are still getting way more bang for their buck in the city than in global capitals.
His claims are backed up by the latest data from Savills. The international real estate services firm places average house prices in upscale Cape Town suburbs at $260 a square foot. That translates to almost R47,000/m². In stark contrast, buyers will typically have to fork out six to seven times more for a home of similar quality in London, San Francisco and Sydney.
In addition, the city’s capital growth prospects for real estate appear more favourable than those in many global capitals. Cape Town ranks fifth on Savills’s latest world cities prime residential index in terms of price appreciation prospects.
The index, which tracks high-end residential property prices in 30 cities, is expected to slow to an average 0.5% in 2023, down from 3.2% in 2022. Cape Town, however, is expected to outperform the global average with growth of 2%-3.9% this year, albeit down from 5.1% in 2022.
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