Those of you who follow South African political developments will know that South Africa's credit rating was downgraded to junk status by S&P in April of this year. This came after President Jacob Zuma sacked his finance minister. South Africa's economic growth has stagnated and its property market is either experiencing a fall in house prices or is flatlining. The exception is Cape Town (my erstwhile home town), where the property market has enjoyed strong growth and rising house prices. The Cape Town property market is supported by international buyers including high net worth individuals from other African countries and what South Africans call semigration from Gauteng. There are no restrictions on foreign buyers in South Africa and they can take out mortgages for up to 50% of the purchase price. The question is for how long will Cape Town property prices continue to rise against the decline in the rest of the country's property market. As Gauteng sellers see a fall in their own house prices, they may be unable to afford their move to Cape Town.
Foreign-owned property accounts for some 8 to 10 percent of residences in the Western Cape region, where Cape Town is — much higher than the national average of about 3 percent. Foreign buyers mainly focus on the luxury market. Nationals from Britain and Europe accounted for more than half of foreign sales in 2016.
As the article on the "Property24" website of 13 July 2017, reports, the South African residential property market is expected to experience decreased activity. However, Schalk van der Merwe from the Rawson Properties Helderberg group reminds that the Cape Town property market has historically performed more strongly during recessions and has continued to grow.
“The single most important factor in driving property market growth is demand, and demand is something Cape Town has always had in spades,” says Van der Merwe. “The recession may decrease local demand to some extent, but trends like semigration are likely to continue, as are purchases by foreign nationals and people in the tourism industry who will benefit directly from the weaker rand.” Semigration describes the relocation of residents from one South African city to another and has accounted for a huge proportion of property sales in Cape Town in recent years.