The recent interest rate hikes and rising inflation in South Africa may have deterred some would-be homebuyers, but the luxury property market remains surprisingly resilient despite the economic pressure.

This market segment is also somewhat ‘immune’ to the knock-on effects of the covid-19 pandemic, with Lightstone data revealing that in 2021 (a year in which many covid-restrictions remained in place), 984 homes valued at over R10 million were sold in South Africa. This is the highest number in recent years.

“South Africa has always been a country of drastic economic contrasts. It is unsurprising that ultra-wealthy buyers are continuing to exercise their spending power by investing in the luxury property market,” says Grant Smee, Managing Director of luxury property specialists Frankie Bells, a division of Only Realty Property Group.

“Luxury properties are those priced at R3 million and above.”

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As further evidence of the strong position of this portion of the market, the FNB Property Barometer for July 2022 included an Estate Agents Survey that asked sellers their reasons for selling. “The survey found that in the R2.6 million to R3.6 million property price bracket, 12% of respondents cited upgrading as their reason for selling. While downscaling due to financial pressure accounted for just 8% of the responses received.”

Who are the luxury buyers?

International buyers are significant contributors to the activity in the highest-priced property range in South Africa. This is particularly in Cape Town’s Atlantic Seaboard, where an estimated 20% of all luxury property transactions are sales to foreign buyers.

“Foreign buyers enjoy South Africa for its natural beauty and generally temperate winter climate in comparison to the snowy Northern Hemisphere,” says Smee. “They are in search of homes that boast exceptional views, high-end design, extensive security measures and proximity to breath-taking attractions. These attractions cloud include the beaches of Clifton or the mountains of Franschhoek.”

He adds that many wealthy domestic buyers are choosing to remain in South Africa for reasons such as a good quality of life and how far their Rands can stretch locally.

“While in the past we saw buyers prioritising convenience, we are now seeing a trend towards prioritising space and lifestyle in their search for luxury property,” says Smee.

“This shift began with the onset of the covid-19 pandemic and the rise of remote work. Many top-earners are now no longer required to be in the office every day.”

The impact of increased work-from-home policies on the luxury property market is most evident in Johannesburg, particularly in the neighbourhoods surrounding Sandton such as Bryanston, Hyde Park, Sandhurst, and Morningside.

“While property prices in these areas remain high, we are seeing a huge number of luxury homes for sale as owners seek to move out of the city in search of country or coastal living,” he adds.

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Areas where the luxury property market is booming

Gauteng:

Wealthy buyers choosing to remain in or relocate to Gauteng favour country and estate living over the hustle and bustle of the city. “Luxury lifestyle estates less than an hour’s drive out of Johannesburg and Pretoria are in hot demand, with Midrand’s Kyalami Estates and Waterfall Estate a favourite for discerning buyers looking for a more relaxed lifestyle.”

“Buyers in Gauteng are very crime-conscious and so will opt for a luxury home in a security estate rather than a freehold home in most cases,” says Smee. “Homes in these estates range from the R5 million to R20 million and offer buyers security, on-site facilities such as schools and shops and lifestyle perks such as golf courses or running trails.”

Smee adds that other luxury lifestyle estates in Gauteng seeing an increase in wealthy buyers include Serengeti Estate, Eagle Canyon Estate, Southdowns Estate and Blair Atholl Estate.

Western Cape:

The Western Cape leads the luxury property market in South Africa by boasting some of the most expensive real estate in the country, including a home on sale for R172,5 million in Clifton.

“Cape Town is currently the city of choice for buyers in all price brackets and the luxury property segment is no exception. A lack of supply in the most desirable neighbourhoods has driven up prices, with wealthy buyers willing to sacrifice square footage for ocean views and proximity to beaches,” says Smee.

While the demand for luxury property is highest in Cape Town, particularly in security estates and educational nodes where the province’s top government and private schools are located.  Homes in sought-after areas such as Franschhoek, Stellenbosch, Hermanus, Plettenberg Bay and Knysna are also extremely popular with wealthy buyers.

Kwa-Zulu Natal:

Demand for luxury property took a significant hit following the 2021 riots in the province, but homes in coastal towns such as Umhlanga and Ballito are still selling for as much as R31 million. The abundance of excellent private schools in the province has also contributed to demand with parents wanting to be close enough for their children to come home from boarding school on weekends.

“Much like in Gauteng, high-end buyers prefer homes in lifestyle and security estates over freestanding properties with Mount Edgecombe Estate, Cotswold Downs, Zimbali and Simbithi Eco-Estate as the locations of choice for wealthy homeowners,” says Smee.

“We expect the growth in the luxury property market to continue for years to come as domestic and foreign buyers continue to take advantage of the lifestyle and natural beauty that the country offers,” he concludes.

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This article was written by Grant Smee, the Managing Director of luxury property specialists Frankie Bells, a division of Only Realty Property Group.