While the first-time buyers’ market is booming owing to the historically low-interest rates, the luxury market in suburbs across South Africa is experiencing a pinch as many adopt a wait-and-see approach to investing over this tumultuous period.
Yet, despite this pinch, many sales continue to occur within the luxury market. According to the RE/MAX National Housing Report for Q3 2020, properties priced above R3 million accounted for 4.6% of the total transfers recorded by Lightstone Property data this quarter, shifting from the 3% market share it held last quarter. This makes it the price segment that reflected the best recovery since Q2.
One of the most often publicised luxury suburbs within SA is that of the Cape’s Atlantic Seaboard and surrounds. This market is experiencing a slowdown when compared to last year. According to Propstats, a collective database system for estate agencies in the area, the Cape’s Atlantic Seaboard figures reflect an average (taken from 01 Jan 2020 to 06 November 2020) of 147 days (21 weeks) to sell a property. This is the average for both freehold and sectional titles combined for the whole area. Last year, the industry average over the same period was 122 days for the area.
Incidentally, the RE/MAX Living office that operates in the area reports an average of 120 days (27 days less than the industry average) within the Atlantic Seaboard for the same period this year. “Properties over R6 million on the Atlantic Seaboard do take longer to sell. The average days on market over the same time period for properties within this market segment is around 216 days* (almost 27 weeks),” explains Susan Watts, Broker/Owner of RE/MAX Living that operates in Cape Town.
Watts also explains that many sellers have had to drop their asking prices in order to sell over this period. In Q3 (June to Sept) on the Atlantic Seaboard, Watts shares that properties listed under R6 million dropped their asking price by 13.8%* on average. Properties over R6 million dropped their asking price by an average of 22.5%*. In the City Bowl, properties under R6 million dropped their asking price by an average of 13.7%* and properties over R6 million dropped their asking price by an average of 18.8%*.
However, Watts states that properties priced correctly do sell for a profit. “It is true that some sellers have taken their properties off the market and in some rare instances, it is because the current market does not enable them to sell for more than what they originally paid for the property. However, sellers who invested in property for the long-term are still making good returns in our areas of operation,” says Watts.
Whether a homeowner achieves a sale is all about knowing how to price the property correctly and accepting the most reasonable offer presented. “Buyers are spoiled for choice. There are many buyers looking but, with so much on offer, they are spread over a wider stock base. Buyers are also often offering far less than the listing price. In several instances cheeky offers were presented and rejected in the last 6 months and looking back, these offers were indeed the best offers and those sellers are now willing to accept even less than what was originally on offer. All offers should be considered seriously and employ the use of an experienced area specialist as your property professional to guide you when pricing your property to sell,” Watts explains.
When selling a luxury home, a real estate professional with global connections can also help sellers price correctly for the international market. According to Watts, the RE/MAX Living team have handled a number of emigration sales this year. “It is however also interesting to note that the number of foreign buyers who have purchased has increased from last year. This is most probably due to (a) the attractive exchange rate; (b) the drop in prices; and (c) the cost of living has increased internationally and foreign buyers can live a far cheaper lifestyle in SA due to the lower exchange rate,” says Watts.
For the year thus far, RE/MAX Living can attribute their international sales within the City Bowl, Atlantic Seaboard and Milnerton to buyers from Germany, the UK, the United States, Switzerland, the UAE, Netherlands, Ireland, Finland, Canada, Austria and Australia.
“The South African real estate market is one of the most affordable markets for luxury real estate investors. While the luxury market starts anywhere from around $7 million in other parts of the world, here in South Africa, luxury homes start at just over R5 million in some parts of the country. This is what makes South Africa, and the Atlantic Seaboard more specifically, such an attractive option to foreign investors,” concludes Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.