Johannesburg - House price growth may well have slumped to 23-year lows, but wealthy investors are still prepared to spend millions to own a trophy property in a posh suburb.
A 616m² penthouse apartment in the ultra-luxurious Penrith building on Cape Town's V&A Marina was sold for R43m to a foreign buyer in June.
And a standalone house in Clifton's swanky Nettleton Road, arguably South Africa's most expensive street to live in, changed hands at a cool R36m. This went to a Gauteng businessman.
Basil Moraitis, Pam Golding Properties' area manager for the Atlantic Seaboard and City Bowl who concluded both sales, said that despite the global recession, wealthy investors still believe in property as a medium- to long-term investment.
"Investors are still prepared to pay top prices for prime, iconic properties that offer a lifestyle of unmatched luxury and sophistication. The current market conditions mean they have a wider selection of outstanding homes in prime areas to choose from than ever before."
Atlantic seaboard buyers are also prepared to pay big bucks for a roof over their Porsches, Lamborghinis and Harleys. Moraitis sold two basement parking bays sized a tiny 13 sq m each in Clifton in June for R580 000 and R750 000 respectively. That translates into a staggering R58 000/m².
Latest figures from Absa confirm that upper-end suburbs are holding up better than their middle- and lower-end counterparts. In fact, the upper end is now the only sector of the South African housing market still achieving positive capital growth.
According to Absa data, prices of luxury homes valued between R3.1m and R11.5m were still rising by 4.5% in the first quarter of 2009 year-on-year. That is in contrast to house price movements in the market priced below R3.1m, where Absa recorded a drop of -0.3% over the same period.
Jacques du Toit, senior property analyst at Absa home loans, said luxury suburbs were less exposed to the overall housing slump than cheaper areas because wealthier households were probably not as heavily affected by macro-economic factors such as inflation, interest rates and unemployment.
World's rich turn to property
It's not only South Africa's super rich who continue to pour money into bricks and mortar investments. According to the 2009 World Wealth Report released earlier in July by investment group Merrill Lynch and French consultancy Capgemini, the financial crisis has prompted well-heeled investors across the globe to increase their exposure to property.
It appears that property, along with fixed income and cash, is now considered a safer bet than equities. The report said: "The world's wealthy investors reduced their exposure to equities and increased the proportion of their assets in safer and simpler investments in 2008."
Allocation to real estate investment as a percentage of total assets increased 4% in 2008, totalling 18% of overall high net worth individuals' (HNWI) portfolios globally by the end of the year. That's despite 2008 being the worst year on record for global house prices, and a dismal performance from listed commercial real estate stocks.
According to the report, allocation to fixed income and cash-based investments increased 6% in 2008, totalling 50% of overall HNWI portfolios globally. Equity investments dropped from 33% to 25% of total assets in 2008.
Merrill Lynch and Capgemini track the annual asset allocations and wealth levels of the world's HNWI. The latter are defined as people with investable assets of at least $1m (R7.9m).
- Fin24.com