Home / Home Buying & Selling  / Why super-expensive homes are still selling

Why super-expensive homes are still selling

More R10m-plus homes were sold in the third quarter of 2015 than in the corresponding quarter last year. This is according to figures by HomeBid, which show a higher number of super-luxury homes were sold in the belt from northern Johannesburg to Pretoria, which are registered in the Pretoria deeds office. This region is home to many estate developers selling off plan to buyers.

Homes transferred in R10m+ market

Selected deeds office 3Q 2014 3Q 2015  
Cape Town 181 180
Johannesburg 106 112
Mpumalanga 16 17
Pietermaritzburg 74 70
Pretoria 103 227
Total 480 606

* Source: HomeBid/SAPTG

Commenting on the HomeBid research, Dr Andrew Golding, chief executive of Pam Golding Properties says: “The top end of the South African property market above R10m continues to be extremely active and this means this segment has shown resilience and buoyancy.”

However, leading agents are reporting slower volumes in this segment of the market, which has been a feature since the beginning of the year.

This home in Westcliff, Johannesburg, was sold for R20,5m by PGP.

This home in Westcliff, Johannesburg, was sold for R20,5m by PGP.

Volumes down, values up

“Buyers are looking for good value,” says Lew Geffen, chairman of Lew Geffen Sothebys International Realty. “Therefore, there’s been a slowdown in sales volumes. Since the recession ended three years ago, there has been a 30% increase in house prices across the board. But with transfer fees up from 8% to 11%, that’s made property more expensive.

“It’s like hiking interest rates up by the same amount. It’s a strain on one’s pocket, and as a result, what irrational exuberance there was in the market, is now just exuberance. People are looking at prices and fair deals. They’re not prepared to take inordinate risks. We’re now in a normal market.”

In spite of that he says there’s been good trading in big-ticket sales, due to foreign money coming in. “I’m speaking about the R50m to R100m market,” says Geffen. “That’s thanks to the rand’s depreciation to such an extent. Two years ago it was R11 to the dollar, now it’s R14 to the dollar – a 27% depreciation. The most prominent big-ticket sales have been in the Cape, but they are also taking place in Gauteng. We just concluded two deals at R36m (photographed above) and R39m which are high for Johannesburg.”

Long time on the market

Why are super-expensive homes selling so well? Geffen says these are homes that have been on the market for five to six years and are now being snapped up if they present good value. Sellers generally, however, still have the false perception their homes are worth more than for what they sell for.

Geffen’s big-ticket sales are denominated in dollars to attract both foreign and local buyers. For the general market he says buyers are local and African who see South Africa as the bread basket of Africa and are taking advantage of the favourable rand-dollar exchange rate. They come from Ghana, Nigeria, Zimbabwe, Namibia and Zambia.

As is apparent from the third quarter figures, Samuel Seeff, chairman of Seeff Properties, says despite what is undoubtedly a very poor economic environment, luxury and top-end buyers are still demonstrating their confidence in the country’s blue chip property locations.

“This is most prevalent in Cape Town, the Atlantic Seaboard and some areas of the Southern Suburbs as well as in the odd, high-value purchase in the Sandton area – the latter [experiencing sales], though still very few and far between and not comparable to what is spent on property in Cape Town,” he says. “While there has been a general tapering off of volumes this year almost across the board, these areas continue to see excellent activity at the very top end of the market.”

Enter the R50m+ era

While fewer units sold in many areas, including the Atlantic Seaboard, there are as many top-end properties being sold at prices that now comfortably range between R50m and R100m. “Seeff has scooped a number of these coveted top-end sales since the start of last year, all in the R50m to R111m price range – the only agency to do so – in areas such as Clifton, Camps Bay, Bantry Bay and Fresnaye,” he says. “This year we’ve already seen the sale of eight properties – half of these sold by Seeff – in the R20m-plus price band in Camps Bay. This is the highest ever on record.

“The areas that we refer to as the blue chip spots, especially those of Cape Town, are seeing a strong store of wealth and high-net-worth individuals are confident about putting millions into property here. In the Sandton area in particular, we are still not seeing the same level of investment – this despite the city being the economic and financial powerhouse of the country; even that of the continent, despite Nigeria’s status as the biggest economy.

“The weak rand, especially against the major currencies, should certainly serve as an incentive for buyers right now who are still looking to get into the top-end areas at a good price. Consider for example that where R20m might have bought you a fairly nice location in Clifton five years ago, you will now need to come armed with anything upwards of R50m to R150m, to even R200m, for a sought-after location such as Nettleton Road in Clifton.”

Shoulder to shoulder with the world

Golding’s experience of the market is that it has been characterised by a shortage of stock, a strong supply of buyers and good activity generally speaking; and although the market is slightly less buoyant than at the beginning of the year, it can still be described as a resilient and strong market – and this is at all levels of the market in which PGP operates.

“As far as the super luxury market is concerned, defined as firstly the R10m to R50m segment, and ultra-super luxury from R50m to R100m, we’ve seen a similar trend with properties being transacted by both locals and foreigners,” he says. “As far as the foreign market is concerned, it is a misnomer than foreigners are dominating the market. In terms of our sales, which are generally the middle- to upper-end of the market, only 5% is to foreigners, and across the entire South African residential market less than 0.5% of all sales are to foreigners.

“What is actually happening at the very top end of the market, both in the case of high-net-worth locals and the few foreigners interested in buying property, is that they are perceiving value based on a comparison between South Africa and its exclusive and best properties with comparable properties around the world. For example, a home in Bishopscourt in Cape Town valued at R25m is the equivalent of a one-bedroom apartment in Knightsbridge in London, and in effect this means one is paying one 10th of the equivalent price of a similar property in London, New York or St Tropez.”


Alison Goldberg is the former property editor of Business Day (1985) and the Financial Mail (1991-99). In 1995 she won the Sanlam Financial Journalist of the Year Award. She has edited such titles as National Constructor and The Miner in Australia and has freelanced for The Star, The South African Jewish Report and The Jerusalem Post.

Review overview