Hint of fewer foreign buyers of SA property

There is a hint of a slowdown in the prominence of foreigners buying of domestic residential property, revealed the latest FNB Estate Agent Survey.

According to John Loos, household and property sector strategist of FNB, the drivers of such a slowing may be threefold.

Firstly, a reasonably “well-behaved” rand in recent times caused a bout of house price inflation of domestic homes in certain foreign currency-denominated terms, and a lack of further South African housing affordability improvement in others.

Secondly, residential property’s global popularity as an asset class may just have cooled off mildly in recent times.

Thirdly, it is not inconceivable that a deterioration in domestic economic performance along with heightened social tensions could cause greater foreign residential investor caution.

The estimated percentage of foreign buyers declined from 5.5% in the preceding two quarters to 4% as at the second quarter of 2015.

This decline in the foreign buyer percentage in the first half of 2015 follows a prior broad rising trend that lasted from a low of 2% late in 2010 to a 5.5% high by the end of 2014.

Loos cautioned that it is still difficult to draw conclusions from the survey as to whether there is yet an absolute decline in the overall number of foreign buyers.

He pointed out, though, that of interest is the seeming gradual change in the key sources of foreign buying over the longer term, with more coming from the rest of the African continent in recent years.

Foreign buying of SA property by African continent buyers remained significant in the fisrt half of 2015, estimated at 20.5% of total foreign buying.

"Domestic residential property continues to appear cheap to foreign buyers, if one compares it to levels back around 2011 before the multi-year slide," said Loos.

"However, that foreign currency-denominated SA house price decline slowed significantly in 2015 due to recent a period of relative rand stability, and actually even showed some significant increase in euro terms."

Source: Fin24