The Rainbow Nation is becoming more and more unrecognisable every time I go home for a deservedly sunny holiday. From the frenzy of construction to the signs of a welcome redistribution of wealth, it's obvious that South Africa has come of age since the end of apartheid; and this has prompted extensive interest from British and European second-home buyers who can see that investing in South Africa property is no longer an unusual and risky choice.
Well, perhaps risk is relative, and certainly it would be remiss not to mention the issue of crime, which peppers expat conversations round the 'braai' (barbeque) in drizzly London gardens. But the companies building the developments that the Brits snap up know about their concerns and gated communities are commonplace. The fact is you need to be careful and aware, as you should be wherever you live, but it shouldn't be a deal-breaker.
On the plus side, South Africa has enviable weather (think of Christmas on the beach), flying time is only about 11 hours and overnight so there are no lost holiday hours, it is only one hour ahead of Britain so no jet lag, and I'll surely not be biased in saying it is the most beautiful country in the world. Of course, that makes the difficult question of where to buy even harder. The fact that Cape Town is the most famous and popular starting point for international visitors is completely justified, as anyone who has driven to the beach in the lee of Table Mountain will agree. The trendy, lively mother city has everything to offer, which, of course, hasn't gone unnoticed, meaning Capr Town property is rather more expensive than the rest of the country. Average house prices in 2006 in Cape Town were R970,331 (£67,500) according to South African bank Absa's house price index, whereas Johannesburg averaged R875,508 (£60,900) and Durban R854,238 (£59,450). The index is based on mid-priced properties below R2,700,000 (£187,900), although you will be hard-pressed to find a seafront property for that price.
Whereas the uber-expensive southern Atlantic seaboard Camps Bay properties and Clifton properties were the mainstay of pound-carrying home seekers a few years ago, buyers now look to the whole city as a ripe property opportunity. Engel and Voelkers is selling a four-bedroom home in Blouberg for R4,500,000 (£314,000). The area is across Table Bay on the northern Atlantic seaboard, and is where the iconic postcard views of Table Mountain come from, and which you can enjoy from the living room balcony.
It's always useful to investigate where the locals own their holiday homes because invariably inside knowledge has helped root out the very best the country has to offer outside of the obvious cities. And while Cape Townians enjoy a richly varied lifestyle in town, they often own a bolt-hole in a more secluded coastal area. Seeff is selling a three-bedroom house in Yzerfontein, about 80 kilometres north of Cape Town for R5,470,000 (£381,000). This fishing village, with its 16-mile beach and breathtaking spring flowers, is one of a string of small villages along the west coast to attract growing interest as more South Africans look to owning a second home in the stable economic climate of the country, and where international attention will surely follow.
The same can be said for the Garden Route, one of South Africa's most popular tourist destinations. Sandwiched between the Outeniqua and Tsitsikamma mountains, the verdant route takes in the towns of Mossel Bay, Knysna, George and Plettenberg Bay , which have been summer holiday-home destinations for South Africans for years. Now the Brits are moving in too.
Ray Foster, a 62 year-old director of a property company from West Sussex is about to complete on a two-bedroom cottage on Thesen Island, in Knysna. More used to buying property for profit, Ray and his wife intend to hold onto this one and eventually chase summer from one hemisphere to the other, enjoying the British weather for half the year and the South African sunshine for the other half. They chose Knysna because it was an area they knew and loved and they wanted a property by the water. The cottage stole his heart "and it wasn't too bad on the purse either," Ray says, having paid just over R2,500,000 (£174,000) for it through Seeff. He also cites the lovely people and night flights as factors in the decision to buy in South Africa, and his advice to anyone thinking about it is "go for it". He doesn't believe the scare stories about crime should affect a property decision. "I've been going there for 14 years and I haven't had any problems, provided you're sensible." It helps that the islands, which jut out into the Knysna lagoon, are naturally secured by their location, and of course this only enhances the views.
To follow Ray's advice, Seeff has a two-bedroom house on Thesen Island overlooking the lagoon and freshwater pond on sale for R3,200,000 (£223,000).
On the eastern Knysna head, which forms one half of the entrance to the lagoon, the Sparrebosch Estate is doing its own bit to attract the second-home market. The residential section of the Pezula championship golf course has the enviable option of lagoon, mountain or ocean views and Pam Golding Properties is selling a mountain, golf course and ocean view house with pool and landscaped garden for £420,000.
On the way back to Cape Town from Knysna , Witsand is a small coastal village that lays claim to the largest concentration of Southern Right Whales on the South African coast. Attracting a strong tourist trade in whale watching, rental opportunities abound for a two- to three-bedroom stone-clad home with sea and river views from which to watch the whales, available through Seeff for R2,900,000 (£202,000).
Despite media coverage suggesting a slowdown in the South African property market, the country is still a sound investment opportunity. Admittedly, the days of prices rising by 30 per cent a year are well and truly over, but even a slower pace of growth points to good capital returns. Absa's monthly house price index reported that house price growth in April remained firm, recording nominal year-on-year growth of 15.5 per cent.
Pam Golding Properties chief executive Dr Andrew Golding is upbeat about the rate of growth in the country. He says: "As we predicted, over the past year we saw residential property achieve capital growth on average in the region of 12 to 15 per cent, depending on location. Despite a correction from the heady days of 30 per cent growth, coupled with the fact that we are currently in an upward interest rate cycle, this strong consolidation to what still represents extremely sound capital growth is a further indication of the strength and confidence underpinning the residential property market."
Inflationary pressures have meant a steady rise in interest rates since June 2006, and there may be further increases to come. Despite this, Absa is still predicting nominal house price growth to average 13.1 per cent in 2007. Foreign investors have their part to play in this continued growth. The rand has weakened around 20 per cent in the last 18 months and this is tempting international buyers to the table. Golding says four per cent of total sales at Pam Golding Properties in the year to February 2007 were to foreign buyers, with a "perceptible upturn" in international sales, the bulk to British, German, Dutch, American and Irish clients.
One particularly buoyant growth area is fractional ownership, which has found favour around the world as an alternative to owning a holiday home outright and having to arrange rentals when not in situ. Golding says this has offset some of the growth slowdown as the fractional ownership trend has taken off in South Africa. Seeff has a selection of properties for sale under fractional ownership including the Pala Meetse Eco Reserve north of Johannesburg starting from R238,000 (£16,500) and the Arabella Country Estate an hour from Cape Town starting from R372,000 (£25,800).
Of course, an international sporting event is always a useful driver of economic growth and by reflection the property market. South Africa's hosting of the 2010 FIFA World Cup is expected bring in billions of rands of foreign investment, and property is never far behind when international money is concerned. The effects have already started to filter down, as Golding attests: "As we move towards the 2010 Soccer World Cup, we perceive a steady increase in momentum, coupled with a re-emergence of direct foreign investment leading up to this high profile event, with positive spin-offs for the property market."
With all the talk of the natural beauty of the Cape, Johannesburg often gets overlooked as an investment destination because, admittedly, it doesn't have the spectacular natural features of its coastal brethren. But Johannesburg is the powerhouse of the country, its main economic hub and therefore it supports a large and stable property market that feeds a growing middle class, most notably among the formerly disadvantaged black population. Average house prices in greater Johannesburg have risen from R281,818 in 2000 to R875,508 (£60,900) in 2006 according to the Absa house price index.
This does not reflect the high-end market, which has taken some of the slack in the South African market as growth has slowed. Another Absa study shows that luxury houses across the country valued at between R2.7 million and R9.9 million (£188,000 and £689,000) have increased 7.6 per cent year-on-year in the first quarter of 2007. This is out of reach of many South Africans but exchange rates and international property prices mean some UK buyers are able to afford what South Africans no longer can.
In the suburb of Bryanston in Johannesburg, Pam Golding is selling a flamboyant Roman-style home with five en suite bedrooms, three reception rooms and servants quarters for £642,000, or blow the whole budget on a classically designed five-bedroom residence in Bedfordview for £1,300,000.
Foreign ownership of property is not restricted in South Africa and the process of buying South Africa property is very safe and secure. Foreign buyers can borrow up to 50 per cent of the cost of the property from a South African bank. The costs involved in buying a property are similar to the UK, with transfer duty on a sliding scale up to eight per cent depending on the price of the home. In the 2006 budget, finance minister Trevor Manuel acknowledged the massive jump in house prices by raising significantly the minimum threshold at which duty is paid, as well as raising the maximum threshold at which the highest tax rate is paid. There are also legal and conveyancing fees, mortgage costs and estate agent fees to factor into the purchase price.
First published in September 2007.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.
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