Falling rand boosts BRICS interest in SA luxury property

As the Federal Reserve continues to raise interest rates in the US and the rand continues to lose ground against the dollar and other major currencies, the appetite of foreign investors for luxury property in SA continues to rise.

According to Berry Everitt, chief executive of the Chas Everitt International property group, European and British investors are always quick to spot the potential in the weaker rand exchange rate against the euro and the pound, and this is confirmed by the latest report on foreign buying from property data company Lightstone.

“But this year we have also noticed an increase in inquiries from other African countries, and a big increase from the other countries in the BRICS group (Brazil, Russia, India and China), where the word is spreading among a huge and growing number of affluent investors about the lifestyle on offer in SA as well as the value for money to be found in our luxury real estate market.”

Major attractions for these investors, he says, are the weather, the scenery and wildlife, good financial infrastructure and, very importantly, the relatively low cost of living compared to the quality of life.

“According to the latest statistics from Mercer (see https://www.mercer.com/) Johannesburg and Cape Town are ranked only 191 and 199 out of the 209 most expensive cities in the world. However, these SA cities as well as Durban are ranked highly among the most lovable cities in the world, with Durban coming in at number 89, Cape Town at 94 and Johannesburg at 96 out of 231 cities on the quality of life list.

“By contrast, most major cities in the rest of Africa are much more expensive and less pleasant to live in. Nigerian capital Lagos, for example, is the 28th most expensive city in the world, but only ranks 212th on the quality of life index. Nairobi in Kenya ranks at 111 for cost of living but 186 for quality of life, while even Egyptian capital Cairo which ranks at 183 for cost of living is only at 178 for quality of life.”

Consequently, says Rory O’Hagan, who heads up the Chas Everitt International Luxury Portfolio division, it makes a great deal of sense to many wealthy African executives and business owners to buy upmarket property and live in SA, especially if they are running multinational operations and earning US dollars.

“At the current exchange rate of around R13.70 to the dollar, a R10m luxury property in a superb lifestyle estate will only cost them $730 000, which they consider money well spent to gain access to everything SA has to offer.

“However, the attraction is also there for affluent investors from the BRICS countries, and especially from Brazil and China, which have stronger currencies than SA. The Brazilian real is currently worth around R3.50, for example, so a R10m SA property costs about 2.85m real. And once again, major Brazilian cities are more expensive than SA cities and offer a lower quality of lie, according to Mercer. Sao Paulo is ranked at 26 for cost of living but 122 for quality of life, while Rio de Janeiro is ranked 56 for cost of living and 118 for quality of life.”

Similarly, Everitt says, the Chinese yuan is worth about R2 currently, and affluent Chinese investors keen to gain access to African markets have realised that they can buy at least twice as much property for their money here as they can buy in their home country.

“In addition, an increasing number of Indian and Russian investors are discovering that their rupees and roubles will buy much more property in SA than in London, New York and their other favourite cities.

“And as a result, we are expecting the demand for luxury homes in SA to keep growing, especially in estates around Johannesburg now and along the north coast of KwaZulu-Natal, which are gaining more and more renown among multinational companies and international businessmen.”