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Cape Town - South Africa's luxury residential market offers a massive opportunity for the world’s über rich to extend their search for prize properties, Pam Golding group CEO Dr Andrew Golding said on Monday.
"One potentially exciting aspect of the ultra high net worth individual (UHNWI) phenomenon, especially for the South African property industry, is that when it comes to big ticket real estate the world is top heavy," said Golding.
The vast majority of such transactions are in the Northern Hemisphere. Europe is tops for UHNWI residential holdings, followed by Asia and North America. Africa is bottom of the pile.
“The global recession has led to UHNWIs buying safe and sought-after assets in high value locations at discounted prices, but this is likely to change as markets strengthen and eyes will turn to the excellent value for money offered by South Africa,” according to Savills director Charles Weston Baker.
“South Africa has a huge amount to offer UHNWIs. The chief areas of attraction are hotels, wineries and wildlife conservation/sporting, as these are (less risky) international asset classes and often form part of an international portfolio."
An interesting pointer to SA's market potential is that the number of billionaires in Africa is growing substantially.
There is a high level of wealth concentrated among those who have made their money in real estate, as well as oil, mining and land.
According to WealthX, there are an estimated 23 000 dollar millionaires in Johannesburg and 9 000 in Cape Town.
Growth in numbers of ultra rich
According to private wealth analysts WealthX, the number of people with in excess of $30m in assets to invest has grown by 43% since 2009, said Golding.
This has transformed the prime global property market, fuelling demand for properties in the world’s luxury residential enclaves.
The growth in numbers of UHNWIs reached almost 200 000 in 2013, holding a combined wealth of $27.8trn. WealthX forecasts that this will exceed $40trn by 2020.
In terms of property alone, Savills World Research has identified total global residential holdings by UHNWIs of $5.2trn.
"In general, urban real estate has been the biggest growth story over the past five years," said Golding.
"Property in the world’s major cities defied, or speedily recovered from, the credit meltdown, even in some of the countries where it hit hardest."
Strong price growth has been experienced in world-class cities throughout the world, from London and New York, through to Shanghai and Sydney.
"In New York luxury apartment space sells for R1/m² and in London £6 000 to £7 000 a square foot," said Golding.
Cape examples
"In Cape Town’s Clifton - South Africa’s top luxury hot spot - residential property can fetch in excess of R100 000/m² for apartments."
The highest price for an apartment sold in Clifton, with living space of 834m², was purchased for R198m.
Golding warned, however, that one aspect of the luxury market is that it is difficult - and can be misleading - to compare cost/value by square metre alone.
The Clifton apartment, which has six bedrooms, also includes spacious patios and pools – plus extraordinary views and position.
Foreign buyer interest in lifestyle properties in the Cape Winelands is also stirring, he said.
Entrepreneur and businessman Richard Branson recently purchased Franschhoek’s Mont Rochelle hotel for an estimated R40m to add to his commercial interests.
Who and where are these ultra wealthy people?
North America is home to the world’s largest concentration of UHNWIs, estimated at around 70 000.
"Money from this region is much less footloose and tends to stick to home and near home. American wealth goes primarily to the Caribbean and North American hot spots," said Golding.
"Russian wealth has become more and more prominent. London is a favourite with the oligarchs, who have been devouring prime central London homes, driving up values – as have Arab oil billionaires."
Noticeable now in prime London has been the influx of Chinese buyers and, more recently, UHNWIs from Nigeria.
London apart, modern Russian wealth flows primarily into the Mediterranean, the South of France, Italy and increasingly into Eastern Mediterranean countries such as Montenegro.
Russian buyers are also active in the United States and the Caribbean.
Middle Eastern UHNWIs are an increasingly prevalent buyer group in the global additional home market.
"They are, as one would expect, dominant in Dubai and Abu Dhabi’s leisure developments, but they are also to be found in the key luxury Mediterranean resorts, and have been high profile investors in Marbella, and Sardinia’s Emerald Coast Luxury London apartments are also a favourite," said Golding.
"According to Savills World Research, most Asiatics do not have a culture where additional home ownership in leisure destinations is common. The majority of activity in Phuket and Bali, for example, has been by expats."
Sun, sand and sea are less highly valued in Asian countries than real estate in urban centres.
Some wealthy Chinese have discovered the enjoyment of skiing or owning a vineyard in Bordeaux or South Africa, but these, according to Savills, remain in a minority compared to those Chinese who prefer to invest in infrastructural projects, agricultural land or income-producing real estate.
Tourism and a second home
"Tourism often goes hand in hand with an area’s success as a second home destination," said Golding.
China, for example, became the number one global source market for tourists in 2012.
"If Chinese investors were to embrace luxury sunbelt destinations in the same way as Americans and Europeans, the potential for this market to expand dramatically would be substantial," said Golding.
"Private wealth itself now plays a major role in the real estate business. It has become the lead form of finance being used in more than half of the world’s largest cross-border property transactions – each worth at least US$10m."
- Fin24
"One potentially exciting aspect of the ultra high net worth individual (UHNWI) phenomenon, especially for the South African property industry, is that when it comes to big ticket real estate the world is top heavy," said Golding.
The vast majority of such transactions are in the Northern Hemisphere. Europe is tops for UHNWI residential holdings, followed by Asia and North America. Africa is bottom of the pile.
“The global recession has led to UHNWIs buying safe and sought-after assets in high value locations at discounted prices, but this is likely to change as markets strengthen and eyes will turn to the excellent value for money offered by South Africa,” according to Savills director Charles Weston Baker.
“South Africa has a huge amount to offer UHNWIs. The chief areas of attraction are hotels, wineries and wildlife conservation/sporting, as these are (less risky) international asset classes and often form part of an international portfolio."
An interesting pointer to SA's market potential is that the number of billionaires in Africa is growing substantially.
There is a high level of wealth concentrated among those who have made their money in real estate, as well as oil, mining and land.
According to WealthX, there are an estimated 23 000 dollar millionaires in Johannesburg and 9 000 in Cape Town.
Growth in numbers of ultra rich
According to private wealth analysts WealthX, the number of people with in excess of $30m in assets to invest has grown by 43% since 2009, said Golding.
This has transformed the prime global property market, fuelling demand for properties in the world’s luxury residential enclaves.
The growth in numbers of UHNWIs reached almost 200 000 in 2013, holding a combined wealth of $27.8trn. WealthX forecasts that this will exceed $40trn by 2020.
In terms of property alone, Savills World Research has identified total global residential holdings by UHNWIs of $5.2trn.
"In general, urban real estate has been the biggest growth story over the past five years," said Golding.
"Property in the world’s major cities defied, or speedily recovered from, the credit meltdown, even in some of the countries where it hit hardest."
Strong price growth has been experienced in world-class cities throughout the world, from London and New York, through to Shanghai and Sydney.
"In New York luxury apartment space sells for R1/m² and in London £6 000 to £7 000 a square foot," said Golding.
Cape examples
"In Cape Town’s Clifton - South Africa’s top luxury hot spot - residential property can fetch in excess of R100 000/m² for apartments."
The highest price for an apartment sold in Clifton, with living space of 834m², was purchased for R198m.
Golding warned, however, that one aspect of the luxury market is that it is difficult - and can be misleading - to compare cost/value by square metre alone.
The Clifton apartment, which has six bedrooms, also includes spacious patios and pools – plus extraordinary views and position.
Foreign buyer interest in lifestyle properties in the Cape Winelands is also stirring, he said.
Entrepreneur and businessman Richard Branson recently purchased Franschhoek’s Mont Rochelle hotel for an estimated R40m to add to his commercial interests.
Who and where are these ultra wealthy people?
North America is home to the world’s largest concentration of UHNWIs, estimated at around 70 000.
"Money from this region is much less footloose and tends to stick to home and near home. American wealth goes primarily to the Caribbean and North American hot spots," said Golding.
"Russian wealth has become more and more prominent. London is a favourite with the oligarchs, who have been devouring prime central London homes, driving up values – as have Arab oil billionaires."
Noticeable now in prime London has been the influx of Chinese buyers and, more recently, UHNWIs from Nigeria.
London apart, modern Russian wealth flows primarily into the Mediterranean, the South of France, Italy and increasingly into Eastern Mediterranean countries such as Montenegro.
Russian buyers are also active in the United States and the Caribbean.
Middle Eastern UHNWIs are an increasingly prevalent buyer group in the global additional home market.
"They are, as one would expect, dominant in Dubai and Abu Dhabi’s leisure developments, but they are also to be found in the key luxury Mediterranean resorts, and have been high profile investors in Marbella, and Sardinia’s Emerald Coast Luxury London apartments are also a favourite," said Golding.
"According to Savills World Research, most Asiatics do not have a culture where additional home ownership in leisure destinations is common. The majority of activity in Phuket and Bali, for example, has been by expats."
Sun, sand and sea are less highly valued in Asian countries than real estate in urban centres.
Some wealthy Chinese have discovered the enjoyment of skiing or owning a vineyard in Bordeaux or South Africa, but these, according to Savills, remain in a minority compared to those Chinese who prefer to invest in infrastructural projects, agricultural land or income-producing real estate.
Tourism and a second home
"Tourism often goes hand in hand with an area’s success as a second home destination," said Golding.
China, for example, became the number one global source market for tourists in 2012.
"If Chinese investors were to embrace luxury sunbelt destinations in the same way as Americans and Europeans, the potential for this market to expand dramatically would be substantial," said Golding.
"Private wealth itself now plays a major role in the real estate business. It has become the lead form of finance being used in more than half of the world’s largest cross-border property transactions – each worth at least US$10m."
- Fin24
