New visa requirements hit Cape Town property sales

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This luxury five-bedroomed villa in Camps Bay was sold to an American buyer for R24 million recently. This luxury five-bedroomed villa in Camps Bay was sold to an American buyer for R24 million recently.

Sales to foreign buyers across Cape Town’s Atlantic Seaboard and City Bowl are down by more than 30% year-on-year despite the more attractive pricing facilitated by the slump in the value of the rand against the Pound Sterling, Euro and Dollar.

According to Ian Slot, Seeff’s managing director for the Atlantic Seaboard and City Bowl, seems to mirror the reduction in tourist numbers and one has to assume there is a correlation between the two.

"Our experience has been almost universally that foreign buyers make the decision to buy when they are actually in Cape Town, so if they are not here they are less likely to buy," says Slot.

Cape Town Tourism CEO, Enver Duminy has also just announced that research points to a direct correlation between the drop in visitor numbers and the introduction of the new travel regulations.

It seems sales to foreign property buying is following suit, says Slot. There is a definite trend. We started the year off with activity very much on par with last year and suddenly from about April/May onwards, we observe a notably downward curve in sales to foreign buyers.

The Atlantic Seaboard and City Bowl top the list for foreign buyers looking for second homes on the continent, comprising of about 20%-30% of the sales activity for these areas over the last two years. The estimated loss in turnover could be as high as half a billion for this year, says Slot.

With the rand down by about 15% against the pound and dollar it follows that American, European and UK buyers especially should see property on the Atlantic Seaboard as offering excellent value right now. Yet, instead of a healthy uptick, a notable decline is evident.

Only 112-odd properties have sold to foreigners this year (as at end August), 37% fewer compared to the 152 sales for the same period last year and only 7 (out of 27 sold) are R20 million-plus trophy homes.
Sales to UK and European buyers, traditionally the biggest investors, is down by over 40% while Americans have bought 50% fewer properties this year. Where German buying had been increasing until early this year, it has now more than halved. Even sales to African buyers (e.g. Nigerians) is down by 50%.

In Camps Bay, sales to foreigners is down by about 50%, so too in the high-density apartment areas such as Green Point, Sea Point and surrounds while sales in the CBD is down by over 60%.

The property group expects a similar decline in the demand for holiday rentals from abroad. With the high tourist season fast approaching, there is no doubt that fewer foreigners are likely to book a sought-after rental on the Atlantic Seaboard this year.

This is concerning for buy-to-let investors who may have hoped to cash in on the improved tourist arrivals evident over the last eighteen months, especially given the weaker position of the rand, says Slot.

From an economic point of view, we see the pressure on the tourist arrival numbers as very disappointing especially in view of city’s efforts to actually grow this vital economic sector to bring more visitors and cash flow into the city and country. Tourism brings jobs and progress, even in the property sector, he adds.

A drop in property sales mean less transfer duty and other taxes. Foreign buyers also often improve their properties, this is just part of an economic value chain affected by this development.

Nonetheless, those who do manage to visit the country over the summer months are likely to be swayed to invest in property given the good value that their pounds, euros and dollars can now secure for them.

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Cape Town Property Market  |  Atlantic Seaboard  |  Enver Duminy  |  City Bowl  |  Ian Slot