“Around the globe, as economic recovery becomes more established, more and more wealthy, high net worth individuals are securing residential properties as a means to enhance the value of their wealth portfolios or simply because they wish to one or more luxury homes in prime locations.”
So says Pam Golding Properties group chief executive, Dr Andrew Golding. According to Dr Golding, the investment by wealthy people in residential property both internationally and locally is considerable and they represent a growing segment of the market. Indeed, The Knight Frank 2014 Wealth Report says that for the majority of ultra high net worth individuals (UHNWIs) residential property is the biggest item of discretionary spending, absorbing almost 30% of their wealth.
“Continued global wealth creation, particularly in emerging markets, has been a key driver for prime property markets,” suggests The Wealth Report. “This trend looks set to continue with a forecast increase of 28% in the total number of UHNWIs around the world by 2023.”
According to research firm New World Wealth’s Africa Wealth Report, South Africa is expected to grow high net worth individuals (HNWI) by 35% to 65,700 over the next ten years. By 2013 there were 46,883 core millionaires in South Africa, with a combined wealth of US$127 billion. The number of core HNWIs increased by 21.7%, from 38,522 in 2009 to 46,883 in 2013.The number of HNWIs in South Africa is expected to grow by 16% reaching 56,447 by 2018.
Dr Golding notes that even in the post-recession world of modest growth rates, this growth in the number of local HNWI individuals is assisting in injecting new energy into the upper-end of the residential property market in South Africa and particularly in Gauteng. “Approximately half of all HNWIs are situated in Gauteng and they are looking for properties both as primary homes and for investment purposes,” he adds.
“The significant infrastructure development, in addition to both residential property and commercial property development under way in Gauteng, plus the strong demand for homes in the region, are positive indicators of future growth in property transactions and prices.
Indeed, throughout Gauteng, Pam Golding Properties has found that the demand for well located high-end properties has become relentless and is outstripping supply,” notes Dr Golding.
“Through our offices in Gauteng, we have noticed that the residential property market has shown renewed activity in the top end of the market with property prices in this sector reflecting notable growth in 2014.
Due to the fewer number of units in this segment, the actual performance in the price bands above R3m and especially above R12m are largely masked by the weighted average of the bulk of units sold in the R400 000 to R1.5m segments of the market.”
According to Trish Luthuli, new business executive, Pam Golding Properties Gauteng, the list of top-end homes owned by the HNWIs, who are classified as having net assets of $1 million or more (excluding the value of the individual’s primary residence) is growing.
With the most multi-millionaires in South Africa, Sandhurst is apparently home to over 30 South African multi-millionaires, more than any other suburb in the country. It also has the highest multi-millionaire population density within South Africa, with one in every 20 residences being owned by a multi-millionaire, according to a report by WealthInsight. The report cites the combination of large stands, safety and prime location as being the reason behind Sandhurst’s popularity among the ultra rich.
“However, there are a range of different property options available in Gauteng and wealthy individuals obviously invest according to their needs and what stage they are at in their lives. Pam Golding Properties finds that most buyers are looking for a primary home that suits their lifestyle, although many astute investors are finding excellent opportunities in the residential buy-to-rent market,” says Luthuli.
HNWI individuals are purchasing freestanding, sectional title, cluster or golf estate homes available throughout Gauteng’s residential suburbs. There are also a number of luxury mixed-use developments in the pipeline, which are capturing the attention of potential investors. These include the impressive Steyn City lifestyle resort in the Fourways area, where the first homes will go on sale in March 2015.
“A plethora of upmarket, high-rise apartments are being developed in centres such as Sandton, Rosebank, Melrose and Menlyn,” says Luthuli. “These are being built in an effort to keep up with the substantial demand for quality accommodation close to the vibrant centres of Gauteng.
Melrose Arch, the Sandton Eye, Park Central in Rosebank and The Regency in Menlyn, Pretoria, are just a few such residential developments that are capturing the attention of wealthy individuals. They are also being snapped up by those looking to make good returns on their investment through the rental market.”
“A major new trend in the upper-end of the property market in recent years has been the demand from HWNIs for a fully integrated ‘work and play’ luxury lifestyle,” adds Luthli. “Many wealthy individuals no longer want to travel long distances in heavy traffic to work, entertainment and shopping centres. They rather seek a lifestyle that is attractive, secure and highly convenient with their workplace and amenities close to hand. Consequently there has been a mushrooming of these highly innovative lifestyle and luxury apartment developments around Gauteng.”
Many foreign buyers, including a number of HNWI from other countries in Africa, are increasingly looking to purchase properties in South Africa, according to Luthuli. The weaker rand has assisted them in acquiring property at relatively good value compared with property prices in many of their own countries. These buyers are from across the globe with Europeans being prominent and a number are from East, Central, West and southern Africa.
Luthuli says that many of these African investors see themselves as Afripolitans; citizens of Africa and citizens of the World. MoneyWeb has noted that between 2013 and 2023, Nigeria will grow its number of HNWIs by 40% to 22,000, while the number of these wealthy individuals in Mozambique is projected to grow 133% to 2 100. They are showing a particular interest in Gauteng residential properties with some buying properties for investment purposes rather than for use as a primary home, according to Luthuli.
Some commentators have argued that the robust growth in foreign investment in the local residential property market is pushing up prices and making property less affordable for South Africans. This is, however, not borne out by statistics, as foreign buying accounts only for around 3.6% of the total value of residential sales. Foreign investments of this kind are highly positive for the local economy and should not be discouraged.
“The rental market is more robust than ever in many residential areas of Gauteng, making properties a prize investment that can deliver sound returns. Security and easy access to facilities remain paramount to the people of the province with homes in secure complexes, apartment blocks and estates being particularly popular,” notes Luthuli.
“HNWIs are affluent, highly successful people who have shown great care and astuteness in the conducting their affairs. This is why Pam Golding Properties has developed its special Luxury Collection, which ensures that the marketing and sale of homes is managed at the highest level.
This initiative provides HNWIs the assurance that their transaction decisions are as well informed as possible and completely trouble free,” concludes Luthuli.