Property shows growth resilience
eferring to the latest FNB property barometer, FNB senior economist Siphamandla Mkhwanazi says the pandemic has not had the negative effect on house prices as initially expected. The FNB House Price Index (HPI) shows annual house price growth flatlined in October at 2.6% year on year. Despite the mild reflation in recent months, the overall residential property price growth remains below inflation, as has been the case for most of the last decade.
Lower priced properties are performing better, with the bottom 20% of price distribution (values below R500,000, using FNB transaction data) averaging 11.4% year on year in the third quarter this year. On the opposite end of the spectrum, the top 20% (>R1,9m) averaged 0.7% year on year in the same period. Despite the pandemic, industry-wide data shows bourgeoning home-buying activity, with the volume of mortgage applications reaching multi-year highs.
But, he says, although the year-to-date applications volumes are approximately 9% above the same period in 2019, approvals lag as lenders are being cautious amid an uncertain economic outlook, only outpacing 2019 levels by approximately 1.5% year to date. “In our view, activity is shored up by lower interest rates, attractive market pricing, lower transfer duties and the changing housing needs due to the pandemic,” he says. “Furthermore, liquidity in the market has remained relatively intact. Approval rates are slowly recovering from their recent lows in May and June during the height of the lockdown, and subsequently, risk cuts from lenders, and have now cleared the long-term average.”
Loan-to-value ratios (LTVs), estimated from Deeds data, also continue to tick up, mainly driven by market forces: first-time buyers generally require higher LTVs, but there’s also stiff market competition among lenders. The FNB Estate Agents Survey shows that more affordable properties and higher demand gave sellers a bit more room to negotiate. The survey shows that the average discount from the listing price has pulled back slightly, from 13% in the first quarter to 11% in the third quarter.
As a result, price reductions have not been as large as initially feared, underpinning resistance in house prices. “Price growth has held up and volumes reached multi-year highs, particularly in middle-priced segments, in contrast to initial expectations. Notwithstanding, income pressures pose a significant downside risk in the coming quarters. For instance, if job losses spread to more white-collar occupations, we should expect further weaknesses in house price growth into next year,” Mkhwanazi says.
Grenada lures more South African investors
emand for second passports and citizenship by investment (CBI) programmes has spiked since the move to level 3 of the Covid-19 lockdown, says Nadia Read Thaele, MD, LIO Global, a firm specialising in second residency and CBI planning. Grenada currently tops the list, with an increase in applications of 120% compared to last year, Read Thaele says. Most investors are choosing to invest in real estate for the added benefits, but many families opt for the cheaper donation alternative. The success rate to date is 100%, she says.
Grenada is one of the few countries with both an active CBI programme and a bilateral investment treaty that allows living and working in the US via the E-2 Treaty Investor Visa programme. This is a significant drawcard for South Africans who want to gain access to the US, one of the most difficult countries to get into, she says. Property investment starts from about R3,6m or about R5,37m for a family, including costs. This equates to the cost of an apartment in Mouille Point or Melrose Arch.
FNB recently noted that emigration-related property sales account for some 17% of all current sales in South Africa. While many are actively looking to emigrate, Read Thaele says numerous wealthy South Africans are instead investing in offshore property in areas where they can secure a second citizenship.
The Grenada E-2 visa option also costs substantially less than US EB-5 investor visa, and the process is much simpler. The processing time for the E-2 visa is usually about two months, compared to five years for the EB-5 visa – and then it would take another 24 months before you can even move to the US on an EB-5 visa.
Offering more than just the enviable Caribbean lifestyle, Grenada is politically stable and has excellent tax advantages and an investment-friendly regime. As a member of Caricom (Caribbean Community), an organisation of 15 Caribbean nations and dependencies, it offers freedom within the Caricom group, including countries such as The Bahamas and Jamaica.
The Grenada E-2 visa is also one of the fastest routes to second citizenship (under six months), and a passport with visa-free travel to more than 143 countries including the UK, the Schengen states, Singapore, Hong Kong and China. If you invest in the real estate option, you’re allowed to resell after three years (or five years if you sell to another CBI investor) and still keep the passport.
The visa is valid for five years and can be renewed without any limit on extensions, provided that the underlying investment still qualifies. Spouses and dependants are usually granted the same period of stay as the principal. Another significant benefit is that the principal’s children under 21 can attend a public or private school in the US and are eligible for in-state tuition.
Reserve offers discounted wildlife viewing
anbona Wildlife Reserve has opened its Explorer Camp with a special offer for South African residents. Known as the Western Cape’s premier wildlife destination, Sanbona is situated close to Montagu, a three-hour drive from Cape Town along Route 62. The Explorer Camp is located within the north east of the sprawling reserve, which stretches across 58,000ha of the wide, open plains of the Klein Karoo.
This wilderness trail experience is aimed at those who enjoy walking safaris and the ambience of a tented bush camp. The camp is situated along a beautifully shaded riverbed and operates seasonally during the summer months (October to April), with departures on Fridays. The two-night guided walking safari experience is offered on an exclusive-use basis to a small group of up to six guests (16 years and older), who are active and reasonably fit. The camp is off the grid and accommodation is provided in three double tents with comfortable beds and an outdoor bathroom that comes complete with a hot shower under a tree.
The camp has an open-air lounge and dining area under canvas. Guests enjoy evenings around a campfire under the starry skies of the Karoo, and delicious, wholesome South African dishes prepared on an open fire. Explorer Camp offers the original safari on foot. Distances walked vary each day but can last up to four hours and may include opportunities to encounter the Big 5.
A game viewing vehicle remains in camp and depending on where guests walk that day, the trail may start from camp or depart from camp by vehicle to visit another area of the reserve. A qualified, experienced guide hosts the Explorer Camp guests and shares knowledge of birding and wildlife, as well as the cultural and natural history of the area.