Why does it make sense to sell property in South Africa to UK buyers? For one, everybody knows about the historical ties between Britain and South Africa. A lot of Brits are from South Africa and still have family in South Africa and would want to have something of their own in the country. So, there are a lot of people in the UK who have an emotional attachment to South Africa. But that’s not the only thing.
It’s just a fact that the South African economy is in dire straits today. Growth has slowed down and the value of the South African Rand has fallen as well. Today, 1 British Pound equals 23.52 South African Rand. This represents a serious drop in value, which means properties in South Africa are cheaper than ever before.
This presents a terrific opportunity for UK buyers who were always interested in buying a house in South Africa, but held back because of financial constraints – now is their chance to buy, as the property market in South Africa has really bottomed out.
Most UK buyers look for properties in Cape Town and the Western Cape. These are some of the most beautiful places in the world with sandy beaches, lovely vineyards and a great outdoor lifestyle. Despite the slowdown in the South African property market over the last couple of years, Cape Town has still seen a plenty of new property developments, brand new apartments and beachside villas. Properties here are still very much hot, as they have always been.
But generally, outside of Cape Town, South Africa’s residential property market has had a serious price deflation because of the weakness of the Rand and growing worries about the national economy. As economists predicted at the start of 2015, a lot of consumers cut back on expenses. The rand is at an all time low of R17.99 against the dollar in 2016. Home prices have continued to slide and the outlook for the residential property market has never been worse.
Indeed, it is only likely to get worse. As real estate analyst John Loos explains, “Over the next number of years we should see a sizable real price correction. This means you can have nominal house price growth, but it’s below CPI inflation, or below general inflation of the country, therefore that translates into a price correction.”
It’s certainly not a great time to be in South Africa right now. South Africa’s slowdown began a couple of years after the global credit crunch, in 2010. Since then, a lot of estate agents in the country have closed shop as buying activity has been at a real low. We did see some life return to the South African housing market in 2015, but that wasn’t to last for long.
The South African government has done what it could to speed up the buying process. A typical real estate transaction takes 3 months to be completed in South Africa and is generally hassle free. Taxes and fees are quite reasonable – at just 5 percent of the purchase price. Once an offer is accepted in writing, it is legally binding on both the buyer and seller – so this ensures that both the buyer and seller are protected during the sales process.
We expect the interest in South Africa to return soon, largely because of the low prices that so many great properties in the country are selling for. South Africa is disadvantaged by the fact that most international buyers look for properties in Cape Town. There’s not much interest in Johannesburg, Durban or for that matter in the KwaZulu Natal province. That has to change, if normalcy is to return to the South African property market in 2016.