Property specialist and chairman of the Seeff Property Group, Samuel Seeff, says that an alarm is sounding over wealth leaving South Africa, and investors look elsewhere for more stable and better-run property markets.
Seeff said that while the top-end of South Africa’s property market is still enjoying record sales – particularly in the Western Cape – investors are spending less, with the top value of properties being sold showing a slowdown and even stagnating in some areas.
According to Seeff, it is clear that wealth is flowing from other South African property markets into the Western Cape – but he said that much of the wealth is also going offshore.
“Where we do see the wealthy investing, even in the Cape, they are spending less than what they could with the rest then potentially invested offshore,” he said.
Seeff said that the movements and status of the top-end of the property market have historically been a reliable initial indicator for investment in the country.
“It is the ‘canary in the coal mine’, so to speak.”
Despite two exceptionally good property years – and a record number of sales above R20 million in the Cape in 2022 – property data clearly shows that the upper price limits are growing in the region, while it has stagnated in the Sandton/Johannesburg area, Seeff said.
“Confidence is worryingly low, and the wealthy are clearly ‘voting with their wallets’, showing that the wealthy are not confident about their investments. There is growing concern about where the country is heading,” the group said.
Comparing the Cape Town and the Johannesburg/Sandton areas lays the issue out clearly.
According to Seeff, there has been slow movement above the R10 million price band for the last ten years, and upper price limits are not moving at all.
Even in the Cape, Seeff noted that despite the record number of sales above R20 million across the Cape Town Metroin 2022, upper price limits have remained more or less the same as they were five years ago.
“It is notable that more properties sold above R20 million in Stellenbosch – ten sales with a combined value of about R330.6 million – over the last year compared to Sandton/Johannesburg where just seven sales worth under R194 million were recorded,” Seeff said.
The upper-end sales in the Johannesburg/Sandton areas were also mostly in the lower R20 million range, with only a single high-value sale of R50 million in Steyn City.
“The highest price achieved in Sandhurst reached only R30 million, well below what we should expect for what is one of the two top suburbs on the continent,” Seeff said.
In Cape Town, sales are mostly in the lower R20 million range despite a record 120 properties worth a combined R3.7 billion sold above the R20 million last year.
“Only just over a handful of sales were above R50 million, and the top-end price ceiling has hardly moved since around 2015,” Seeff said.
Despite the buoyant investment last year by international buyers, they may become reluctant to invest locally, the property expert said.
“There also appears to be no sales above R50 million in Clifton or at the Waterfront last year which is concerning, given that it was a record year for this sector, and these are absolutely prime locations.”
Around 30% of all sales in the Cape were on the Atlantic Seaboard as foreign investors still see good value in the area, Seeff said. The prevailing trend is that most top-end purchases are happening in the city, while Joburg lagging.
R20 million-plus sales
“Even just looking at the R10 million-plus level, this tells the story of 241% more sales in Cape Town compared to the Johannesburg and Sandton areas, with 546 sales compared to just 160. This clearly shows how much more the wealthy will invest in Cape Town,” he said.
“The reason is well understood; better service delivery and confidence in local governance.”
2022 sales volumes – Cape Town vs Joburg/Sandton
Seeff said that a strong property market supported by wealthy buyers is the cornerstone of a strong economy. Real estate contributes about 6% of the total GDP and supports three jobs for every R1 million generated.
The specialist said that the sales data is an early warning indicator that South African needs to make big changes at a government level – needing strong leadership and urgency from cabinet to get the economy back on track.