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SA homes 10% more pricey for pound investors post Brexit

london resizeForeign buying of South African property has moved sideways, according to the FNB Estate Agent Survey for Q2 2016.

“Using a two-quarter moving average, for smoothing purposes, the estimated percentage of foreign buyers has moved in a ‘narrow’ range near to the 5% level over the last three quarters, moving slightly from 4.8% of total buying in Q1 2016 to 5.11% for the two quarters up to Q2 2016, which is the same as the 5.11% of three quarters ago,” said John Loos, household sector strategist and economist for FNB. “After a noticeable recovery in the estimated levels of foreigner buying from a 2% low late in 2010, the estimated percentage of foreign buyers peaked at 5.77% in the final two quarters of 2014. So, recent quarters’ estimates are a bit off that 2014 estimated high.”

African continent buyers saw its share of total foreigner buying decline mildly in H1 2016 to 27.5%, from a two-quarter moving average of 31% for Q1 2016.

“However, this latest percentage remains high compared to a mere 8.5% as at 2010,” said Loos, noting that for the first two quarters of 2016, the Cape Town region remained the major South African region with the highest percentage of estimated foreign buying (8%).

The “Brexit” vote in UK may have had a mild impact on UK resident demand for property in South Africa, insofar as currency fluctuations have any impact, said Loos.

“This is because Brexit made South African property instantly more expensive for those buyers operating in UK pounds, due to the big impact that the referendum outcome had in weakening the pound,” he said. “Whereas in July 2016 the FNB House Price Index, denominated in dollar terms, declined year-on-year by -7.4% and the euro-denominated index by -8%, the UK pound-denominated FNB House Price Index rose by a very significant +9.6% year-on-year.

“This sharp jump in domestic house price inflation for pound investors comes largely from a post-Brexit vote drop in the pound from a GBPZAR22.33 average in May, to GBPZAR18.95 average in July 2016. However, part of the story has been a noticeable recovery in the rand, too, following the currency’s ‘Nenegate’ slump late in 2015.”


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