How South Africa’s new visa requirements are killing the property market
Sales to foreign buyers across Cape Town’s Atlantic Seaboard and City Bowl are down by more than 30% year-on-year according to real estate firm, Seef.
This, it argued, is despite a more attractive pricing facilitated by the slump in the value of the rand against the Pound Sterling, Euro and Dollar.
This, said Ian Slot, Seeff’s managing director for the Atlantic Seaboard and City Bowl, appears 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.”
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.
David Frost, CEO of the Southern African Tourism Services Association, said earlier this month that South Africa will lose R7.5 billion a year if the new visa regulations were not scrapped.
The new rules were implemented to curb human trafficking.
Last month Stats SA data showed a 9% drop in the number of international visitors year on year in South Africa.
“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,” Slot said.
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 2015, Seef said
And this despite the rand being off as much as 15% against the pound and dollar. “Yet, instead of a healthy uptick, a notable decline is evident,” Slot said.
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, the property firm said.
Sales to UK and European buyers, traditionally the biggest investors, is down by over 40% while Americans have bought 50% fewer properties in 2015.
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%, Seef said.
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%.
From an economic point of view, Seef said that the pressure on the tourist arrival numbers is disappointing especially in view of city’s efforts to 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,” Slot said.
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.
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