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The rise and rise

Oct 15, 2017 | Property Investment

When it comes to high-end residential estates as prime property investments, the industry agrees the demand hasn’t flagged, and the offerings are constantly being both fine-tuned and broadened

Estate living is one of the fastest-growing trends in the South African property sector, especially among upper-income earners who can afford the lifestyle and security that gated residential estates offer, says Samuel Seeff, chairman of Seeff. “On the whole, they’ve proven to be excellent investments with above-average appreciation over the past few years, with growth of 20% to 30%, typically.” And it’s not just about sales, he says. Rentals, too, reflect the demand. “Security estates rank among the most sought-after rental properties, and tend to fetch rentals at the upper end of the scale, typically in the R60 000 to R80 000 a month range for top-end estates.” According to Jeff Gilmour, CEO of the Association of Residential Communities, “The organised residential community market is worth R1 trillion, and it represents 30% of the total residential property value in the country.” He prefers the term “organised residential communities” to “estates”, simply because of the wide variety of such housing developments.

“South Africa is one of the global pioneers in residential estate living, says Andrew Amoils, head of research at New World Wealth. “In fact, the only country with more residential estates is the USA. Interestingly, residential estates are now becoming increasingly popular across the globe, especially in the likes of the United Arab Emirates, Portugal, Spain, Mexico, New Zealand, Mauritius and the United Kingdom.” It’s also clear that South Africa’s generic gated residential estate is become increasingly more fine-tuned, to the point where they’re now targeted at niche markets: “They include wildlife, golf, equestrian and parkland, in other words, themed estates,” says Andrew.” New World Wealth’s latest research indicates that trends in this residential space over the past year include a rise in demand for retirement villages in particular but also wildlife estates, and a move away from traditional golf estates.

BACK TO NATURE

“Situated on a wetland”, “in a conservancy”, “indigenous planting” and “boardwalks” – copywriting around luxury estates is increasingly focusing on the natural environment as a primary lure for prospective homeowners, and although security still tops the motivation list for estate living, there’s an ever-growing wish for breathing space, land, nature, a natural outlook, birdlife and a healthy outdoor lifestyle. In other words, living on a luxury estate is no longer only driven by concerns around security, but increasingly a desire for a lifestyle not unlike village living, which goes beyond the undoubted pleasure and peace of mind of watching your children playing safely out in the streets. As Andrew Amoils of New World Wealth notes, “Many developers are now creating small neighbourhoods within estates, as opposed to the old model where houses were spaced evenly around the property. This new model allows for more parkland and open spaces between the neighbourhoods.” Some of these estates are towns rather than villages.

In choosing its top local residential estates for 2017 (see “The top 10 residential estates in South Africa” on page 38), New World Wealth looked at design and space; communal gardens and parks; maintenance; location; security features; views, scenery and wildlife; activities – gym, swimming pool, golf, horse riding, polo, tennis; and facilities – shops, offices, parks, gathering places, playgrounds, schools, hospitals. Analysing the list, it’s clear there’s a strong leaning towards surroundings and environment, and a lifestyle that eliminates most reasons to leave your home environs.

IT TAKES A VILLAGE

Communities within communities. Villages within villages, some for retirees, others for young families. This serves a dual purpose aside from Andrew’s suggestion about village clusters freeing up land for open spaces: If a village is designed for different sectors of the market, the natural demographic of young and old makes life more “real”, like in a typical village or town. And it allows residents to move house within a community in which they’re happy, with the bonus from the estate’s perspective of retaining and recycling buyers. When talking about what makes an estate a superb investment, there are many factors at play, not all of them envisaged at the outset. There’s little doubt that the long-term vision of developers plays a significant role in sustaining and increasing value in top estates, and has brought a new generation of investors and buyers into the market. When the estate’s offering doesn’t remain static but responds to contemporary needs, younger or older buyers see the emergence of aspects of a lifestyle that appeals to them and fits their needs – such as retirement components within established estates, or developments like the vast new Sibaya Coastal Precinct at Umdloti north of Durban. Retirees countrywide were asked what they wanted via a comprehensive online campaign run by Rainmaker Marketing for Tongaat Hulett Developments. The findings were compiled and international models were examined, and a product was created that directly answers retirees’ current needs.

33 Arabella Country Estate is located on the Bot River Lagoon and features numerous dams.
Security is a priority at Val de Vie – it has won an award for Safest House in Africa for its Polo House
Clockwise from top left: Dainfern Estate, established in 1992, has grown to include more than 1 200 homes | Steyn City has play and recreational nodes, including a skate park | OceanDune is one of the developments at Sibaya on the KZN North Coast | Val de Vie is located on the banks of the Berg River, and on the estate there are lakes stocked with fish

LONG-TERM VISION

Some of the first residential estates in South Africa, built in the early 1990s, are Fancourt, Erinvale, Dainfern and Steenberg. Some of these rate in the top 10 estates today – proof of the importance of long-term vision of developers, and the ability of current management to move with the times. Take Erinvale Golf Estate in the Cape Winelands. David Colley of Seeff in Somerset West says that prices in Erinvale have been on the rise, and agents have observed a massive leap in sales values – the average home price escalated by 32% from R5.9 million in 2015 to R7.9 million in 2016. Dirk Uys, estate manager at Arabella Country Estate, and Mike Bisset of Pam Golding Properties consider Arabella a good example of this: “Arabella’s approach has succeeded in keeping the estate up to date and relevant, rather than old and fuddy-duddy. The focus on youth and outdoor activities has attracted a number of young professionals and families with children. The recent opening of access to the lagoon and installing fibre are other examples.” From an investment perspective, it works. “A house sold for R3.45 million in October 2015; less than two years later, in June 2017, the spruced-up property resold for R5.1 million.”

KEEPING UP WITH THE TIMES

Changes in and around an estate can have an impact on the value. Take the long-awaited road infrastructure upgrades around Mount Edgecombe Country Estate in Umhlanga, KwaZulu-Natal, which will – putting aside the years of traffic frustration – dramatically improve the estate’s accessibility, elevating its position to one of the most conveniently placed luxury estates in the province. Or Val de Vie’s acquisition of Pearl Valley Golf & Country Estate next door, which amplified the lifestyle offering to the material benefit of all residents. With new or expanding luxury estates becoming more tightly niched, prospective homeowners have an exciting range of options. Look at KwaZulu-Natal’s prestigious Zimbali Coastal Resort at Ballito, which, by dint of its sensational location, offers distinctly different ecosystems in which to live, yet all residents can access golf, beach or bush. On the flip side, even if an estate is an equestrian one like Mooikloof in Pretoria East or a wildlife one like Mjejane Lifestyle, uniquely fenced into Kruger National Park and with a 10km river frontage, residents still want and get many other lifestyle bells and whistles.

The demand is high for themed estates, as Rosa Willers and Dominique Lochoff, Seeff’s agents for Mooikloof Estate, point out: “Lightstone data shows 31 transactions recorded here for last year. We’re seeing an increased demand for luxury homes in the estate, priced around the R20 million mark.” With the almost limitless ability to work away from the office, the concept of escaping the city for the country is a very real option. Ling Dobson is Pam Golding Properties’ area principal in Knysna and Plettenberg Bay. As has always been the case here, prospective retirees are still purchasing homes for retirement later, but increasingly, she says, “So many people want to get away from the cities, pollution, crime and a lack of environmental awareness, and we’re working with a number of developers who are designing state-of-the-art eco-friendly buildings.” The Garden Route lifestyle is something quite unique, and it provides the appealing cocktail of beaches, nature, great schools and more. Ling is seeing an increase in international buyers who seem discontented with European politics. “Sales in the Knysna/Plettenberg Bay area since May 2017 have totalled more than R90 million for 26 units – about R3.5 million as an average sale. Three of these sales were in Pezula Golf Estate. Of the 26 buyers, eight were local, seven were from Johannesburg, five were from Cape Town, one was from KwaZulu-Natal and one from the Eastern Cape, three were from Belgium and one was from the UK.”

WHERE THE RICH ARE BUYING HOMES

Source: The Wealth Report 2017, published by Knight Frank

The Paarl/Franschhoek/Stellenbosch triangle is the fastest-growing South African area for high-net-worth individuals (HNWIs), with the number rising by 48% during the review period (2006 to 2016).

The Garden Route and the Whale Coast also had high figures, mainly due to the trend of retiring HNWIs moving there.

Cape Town is one of the top 20 second-home hot spots in the world for multimillionaires (along with the likes of Sydney, St Tropez, Miami, The Hamptons and Palm Beach).

Most of the wealthy people with second homes in Cape Town are from Johannesburg, the USA, the UK, Germany, Switzerland, France, Nigeria and the Gulf.

Arabella Country Estate near Kleinmond has started to attract younger professionals and families with children | Mooikloof is an equestrian estate in the eastern suburbs of Pretoria | Steyn City in Johannesburg has a training centre where people from local communities are equipped with the skills needed to work on-site | Mjejane Lifestyle is situated between the Kruger National Park’s Malelane and Crocodile Bridge gates

GIVING BACK

Worldwide, there’s been a clear trend of philanthropy becoming more important to the wealthy. So says the Knight Frank Wealth Report 2017. It’s a little more complex than that, but, in short, in South Africa many of the established high-end estates have extensive community participation programmes, bursaries, schooling, and numerous other supportive initiatives, either officially or unofficially. Arabella Country Estate is part of the Arabella Community Trust, and Val de Vie has the Val de Vie Foundation, which Ryk Neethling believes can serve as a blueprint for other developers: “We allocate 1% of the total developer sales to our foundation, which has exceeded R20 million in two years; 5% of the levy income also goes there. We are changing not only this valley with the luxury property investors we are attracting but also the surrounding communities.”

Lee-Anne Saunders and Tammy Rose are Seeff agents for Boschenmeer Golf Estate in Paarl: “The estate supports a number of charities, including the Dream Community charity, which helps underprivileged children and orphans. It also supports the Drakenstein Municipality with initiatives aimed at empowering and uplifting underprivileged local communities.” At Steyn City, CEO Giuseppe Plumari believes purchasers value the lifestyle resort’s nurturing ethos. Steyn City’s Delivering Happiness to Diepsloot initiative delivers backpacks filled with stationery and food to more than 10 000 Diepsloot primary school learners annually: “Our labour desk has created 13 000 new jobs, and we continue to upskill participants at our skills centre. We have also provided a boost for local artists through a training programme under the auspices of sculptor Charles Gotthard, honing their skills and giving them a new voice and platform to showcase land art.”

IT’S STILL ABOUT LOCATION

The yearning of many prospective estate homeowners to live close to nature makes buying in some estates an investment in more than just a lifestyle. Arabella Country Estate is set within the Kogelberg Biosphere Reserve. “The properties within this estate hold massive appreciation potential right from the outset, purely by being situated in a natural biosphere,” say Dirk Uys and Mike Bisset. “Arabella appreciates over time without requiring hands-on labour and additional financial contributions, purely by the coastal land on which it is built, which in itself raises the appreciation bar of every single property on the estate. Whereas inland estates and their enclosed properties need internal and external structural upgrades to add value and render higher returns on investment and potential profits, Arabella and the residential properties within it increase in value as the protected environment grows in value.”

Val de Vie in Paarl retained its title as top residential estate in the 2017 ratings by New World Wealth. Marketing director Ryk Neethling talks about ingredients needed for an excellent investment: “We’ve seen since 2008 that most secondary residences have struggled – with the exception of a few very prime locations – which is why I believe the old truism about location as the most important element. Location close to good schools, amenities, an international airport and so on. Security and good infrastructure also matter, of course, and in multiple surveys our residents have confirmed security as their number-one priority.” But Val de Vie offers more than that, he says. “We also offer financial security for their investment. Municipalities often cannot deliver basic services, and estates fulfil a lot of these roles, especially if you have economies of scale – as we have currently, with 2 000 levy payers.”

Rupert Finnemore heads up Pam Golding Properties in Gauteng, home to about half of South Africa’s estates: “Estate homes tend to be more expensive than freehold properties, but they also give residents greater control over community expenditure and development. Residential property within popular estates represents a solid investment.” Commenting on the Val de Vie rental market, Ryk says, “It’s very strong, so we have a lot of people building in order to rent, and they’ve done well. We have also seen some investors buying stands – especially some of our larger products – and reselling after a year or two for healthy returns. Most of these investors are local.” What kind of returns are investors getting in these luxury residential estates? “At Val de Vie in 2012,” says Ryk, “you could buy an 800m stand for R480 000 – today, it would be R2.5 million. House prices have moved from an average of R15 000m2 in 2012 to R25 000m2 today. Rental yields have shown a similar increase.”

Steyn City moved up from fourth place to second on the New World Wealth residential rankings. Giuseppe Plumari is the CEO of Steyn City Properties: “Steyn City’s prime differentiator is the fact that all investment in amenities (totalling R6.5 billion) was made upfront, so potential purchasers could see what their future homes would look like, rather than waiting to see if the developers lived up to their promises. This makes it a secure investment. “Early buyers who bought at launch date, March 2015, have seen appreciation of their land value by 20% to 30%. One stand purchased for R2.2 million sold for R3.6 million in 2017. Lifestyle, that’s what differentiates organised residential communities, as Jeff Gilmour calls them. As they continue to add world-class schools, international hotels, office facilities, retail, small-scale farming, cycling tracks and the fi nest security money can buy, it becomes absolutely clear why buying into the right luxury estate in the right location is a smart investment, financially and in every other respect.

THE TOP 10 RESIDENTIAL ESTATES IN SOUTH AFRICA

Source: 2017 Wealth Report, published by New World Wealth in association with AfrAsia Bank

1. Val de Vie Paarl Western Cape

2. Steyn City Johannesburg, Gauteng

3. Zimbali Ballito, KwaZulu-Natal

4. Fancourt George, Western Cape

5. Waterfall Equestrian Estate Midrand, Gauteng

6. Steenberg, Cape Town, Western Cape

7. Mjejane Lifestyle Malelane, Mpumalanga

8. Whalerock Ridge Plettenberg Bay, Western Cape

9. Waterfall Hills Retirement Estate Midrand, Gauteng

10. Fransche Hoek Franschhoek, Western Cape

WHAT ULTRA-HIGH-NET-WORTH INDIVIDUALS WANT IN A HOME

In The Wealth Report 2017, James Roberts, Knight Frank’s chief economist, identifies the key global trends that will shape prime residential property markets in 2017 and beyond, and identifies the most important factors for ultra-high-net-worth individuals (UHNWIs) when choosing somewhere to live:

8.2 Lifestyle
8.2 Personal Security

7.7 Safe haven for capital

7.5 Education for children

7.4 Opportunity for capital appreciation

7.1 Health care

7.1 Access to transport links

6.8 Business reasons

Source: The Wealth Report 2017, published by Knight Frank

Credits: Photographs: Leánne Stander Photography, supplied, Text: Anne Schauffer

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