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Foreigners cool on Cape properties

Feb 14 2011 13:06 I-Net Bridge

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Johannesburg - The number of foreigners who bought properties in the Western Cape dropped last year compared to previous years, according to the 2010 FNB Estate Agent Survey released on Monday.

The estimated percentage of foreign buyers in the city of Cape Town was 3.5% of total buying for the fourth quarter, and an average of 4.75% for the year.

This was significantly down from the estimated 10.75% average for 2008 and 7.75% in 2009.

"The absolute amount of foreign buyers may not have declined as much as the percentages suggest, because the market was thinner in 2008 than in 2010. But that magnitude of decline in percentage would suggest some sort of absolute decline in foreign buying in our region," said the report.

It said that a reason for a decline in foreign buyers may have been an overall increase in foreign investor interest in SA.

"By this we are referring to the well-documented recent surge in portfolio 'yield-seeking' investment by foreigners in South African bonds as well as equities, which in turn caused the rand to strengthen significantly against some of the world's major currencies," the survey said.

In rand terms, the average house price in the Western Cape was estimated to have risen by 10.2% from the 2009 average, while in dollar terms the average increase was a much more substantial 25.3%. In euro terms it was far higher at 32.4%.

"At that sort of rate of price growth, it is hardly surprising that we see agents reporting a foreign buying drop-off. I would contend that the decline has little to do with any rise in negative sentiment towards our country or our region, but more to do with an affordability issue, driven by an increase in investor interest in other South African asset classes," said Clinton Martle, Western Cape regional sales manager for FNB home loans.

An aspect of the survey that showed improvement was that of black buyers.

Agents claimed that buying by black homeowners had risen from 11% in 2009 to 25.5% in 2010.

While this number can be erratic, it represented the highest percentage of black buying since the start of this survey question in 2005.
cape town  |  house prices  |  property
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