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Where the Jet Set likes to Land

Jun 8, 2018 | Featured, Property Investment

What do the strategic buying habits of the super-rich mean for the local residential property market?

Owning a villa in the countryside, a second home at the coast or even your own island may still be the ultimate symbol of success – but with rapid urbanisation and the demand for inner-city living, property investment hot spots are shifting. The super-rich are directing their funds into upgraded industrial zones, revamped historical quarters and even former red-light districts. The Knight Frank Wealth Report 2018 highlights some of the most sought-after city locations that have the right address, facilities and vibe to draw rich investors globally. From Potsdamer Straße in Berlin and Les Grands Boulevards in Paris to Karen, a suburb of Nairobi, city centres that have seen a transformation through urban rejuvenation, infrastructural and tech upgrades and that present a dynamic lifestyle offering are topping the charts.

GLOBAL HIGHLIGHTS: CITIES ATTRACTING THE SUPER-RICH

Residential property in Australian east coast cities such as Sydney, Melbourne, Brisbane, Noosa and Cairns is becoming increasingly popular for global billionaire property investors, says Andrew Amoils, head of research at New World Wealth. Hotel residences are also on trend, especially in big European and Asian cities. Residential estates remain popular, especially in the UAE, Portugal, Spain, Mexico, New Zealand, Mauritius and the UK.

BERLIN The German capital had the fastest-rising property market in the world last year. House prices rocketed by 20.5% from 2016 to 2017, according to the Knight Frank Global Residential City Index. Berlin was recently voted as the best city in the world for millennials, beating 110 other cities. The irony is that if the property prices continue to soar, this hip and happening environment will no longer be affordable to its young entrepreneurial population, which is a significant part of its attraction, even when it comes to rentals. Upmarket areas in Berlin that have seen a turnaround include Potsdamer Straße, Kurfürstenstraße and Gleisdreieck. The area south of Potsdamer Platz – now home to trendy bars and galleries – was once the red-light district and housed a number of Berlin’s newspaper and publishing houses. Berlin’s stable economy, strong population growth and record levels of employment continue to draw interest from international investors who see the potential in this ever-growing creative environment.

LISBON Another destination commanding attention is Portugal. Affluent South Africans, particularly, are not only setting their sights on a home but also seeing an opportunity to gain EU citizenship. “For the bulk of South African residential property buyers in these countries, their primary aim is to acquire European Union residency for their families – mainly with a view to enabling their adult children to gain access to study and work abroad, and to travel freely in Europe,” says Chris Immelman, MD of Pam Golding International. According to the most recent Expat Insider survey, “Portugal offers the best quality of life on the globe, with beautiful surrounds, friendly people, good food, as well as excellent health care and world-class universities, making the transition to life there even easier.” It’s no surprise, then, that the property market is booming, with demand significantly outweighing supply. Undergoing massive regeneration, Lisbon was recently named the World’s Leading City Break Destination in the 24th edition of the World Travel Awards. It’s a prime global hot spot, and a magnet for buyers as a hard-currency investment with solid returns and good long-term capital-appreciation prospects, as well as the opportunity for freedom of travel in the European Union.

NAIROBI Kenya’s capital city continues to draw foreign investment. One wealthy suburb is Karen (named after Karen Blixen, the Danish writer of Out of Africa), which lies just west of the CBD. Since the early 2000s it’s grown rapidly, with many of the original 2- and 4-hectare plots developed into modern housing clusters with shared amenities such as clubhouses, gyms and swimming pools, says Ben Woodhams of Knight Frank, Kenya. Kunaal Samani, MD of Pam Golding Properties in Kenya, says high-income earners in Nairobi prefer to live in gated communities for the benefits of security, controlled access and privacy. Kenya offers high-end residential apartments that present a great investment opportunity. Currently in development is The Pinnacle, a lucrative mixed-use development in Upper Hill.

CITY LIVING REDESIGNED – AT A PRICE

CAPE TOWN The Cape Town CBD has become a global business destination and features high on the list for its investment potential. Tech innovation and a focused inner-city turnaround has transformed what used to be mainly high-rise offices into one of the most wanted residential addresses. It is a smart city with access to some of the world’s most beautiful beaches, top restaurants and notable art galleries. Events like First Thursdays make the city a 24/7 lifestyle zone. Richard Hardie of Knight Frank says wealthy investors help to drive demand for property across global markets, and Cape Town’s rise can be attributed to the value international buyers can get for their money. But where does that leave local investors? Property research and market analyst Sandra Gordon says growth in income has not kept pace with growth in housing prices. This is a worldwide trend, in part reflecting the globalisation of housing markets – with the global rich purchasing homes in prime cities around the world. This means property prices end up reflecting global norms rather than local economic conditions. Local buyers are, however, increasingly investing in micro-living units as the scarcity of property and Cape Town’s geographical expansion limitations have driven prices to an all-time high. “Brand-new developments with no transfer duty are very popular for the local market, as this presents a huge saving for buyers,” says Richard.

Off-plan developments do present good investment options, says Carola Koblitz, manager of communications at the CCID, but it’s wise to do some research and beware the hype. The reality is that the escalation of property prices year-on-year should be levelling out. The escalation from 2015 to 2016 was 15.06%, and from 2017 to 2018 was 21%. “The hype needs to stop,” Carola says, “otherwise we’ll be heading for a bubble, with a downtown full of high-priced, unsaleable new units on the market, with no residents living in them and high rentals attached to high bonds, unaffordable to the majority of ‘downtowners’ who dream of living close to where they work.”

Are there alternatives? “Yes, there are, but the onus is on developers to come up with concepts that promise people a place to live rather than a speculator promise of a fast buck. We may need to see some form of official legislation before this becomes a reality, and I believe it will come.”

LOCAL MARKET ON TREND

Local demands echo global trends, with apartment living and residential and retirement estates being the most sought-after property investment options. “Sectional title apartments in well-located areas remain the most popular among buy-to-let investors,” says Claudius Combrinck, executive director of Uvest Property Sales.

Buying “off-plan” provides investors the benefit of securing the price on sale but having to only take transfer in 12 to 18 months’ time. In most instances, the property will have escalated in value by the time occupation takes place. Naturally there are other benefits such as the certain maintenance costs being covered by the body corporate, making it more cost-effective to manage than a freestanding house.

In Gauteng, there are a number of upmarket lifestyle offerings. Steyn City is an estate that appeals to both young professionals and established family buyers. In Cape Town, Sitari Country Estate caters for buyers looking to pay from R1 250 000 up to R8 million. Stefan Botha, director of Rainmaker Marketing, agrees that estate living is still growing exponentially. “We have seen strong investment nodes in KwaZulu-Natal, the Western Cape and Gauteng. Gauteng has historically been driven by the Sandton market, but interest in the Midrand area has grown significantly with the development of estates such as Waterfall Estate. “In Cape Town, the Atlantic Seaboard has been driving massive investment appetite, and another attracting the wealthy is the Foreshore. Some KZN areas are among the most sought-after in the country, specifically the stretch between Umhlanga and Ballito. Areas that have recently started to attract investment include Sibaya Coastal Precinct and Umhlanga Ridgeside – both of which provide significant capital appreciation.

TEXT Lauren Groenewald PHOTOGRAPHS Unsplash Photo Community, John O’Nolan , Andreas Kind, Bjorn Grochla, Artem Sapegin, Rita Gomes Oliveira, John Jason, Vesela Vaclavikovah, Shalom Mwenesi, Dan Grinwis, Marcelo Novais, Joshua Earle, Jason Briscoe, supplied

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