South AFRICA. Features of the country and the real estate market

About the country

The Republic of South Africa is the most economically developed country on the continent. The country has a population of 60.6 million people, and GDP per capita in 2022 amounted to 6,685 US dollars. South Africa has a strong manufacturing and financial sectors. It is the world's largest exporter of gold and platinum. A key source of foreign currency is tourism. Agriculture is actively developing, among other things due to the surplus of cheap labor. Numerous large and small wineries produce wine, for example, the famous autochthonous red wine from the pinotage variety. The olive oil squeezed in the vicinity of Cape Town is not inferior in quality to Greek or Italian, as there are workers and equipment to quickly deliver ripe olives just removed from the branch to the creamery and get an excellent product.

Another important feature of South Africa is the high legal standards in all areas of business. Do business safely. For example, in real estate, all transactions necessarily go through a lawyer who is registered with the South African Bar Association (LSSA). He keeps the procedure clean. Real estate activity in the country is licensed and regulated by the Real Estate Professionals Act (PPA), which also protects sellers and buyers from fraud and unprofessionalism. The transfer of ownership rights to the object takes place in accordance with the Law on the Transfer of Property.        

South Africa is, in principle, a highly developed country in many aspects. There is a decent level of medicine here (in particular, the world's first heart transplant was performed), there are good schools and world-class universities. Not to mention hotels, malls, restaurants, the quality of food and prices in which pleasantly surprise Europeans.

Now add to the above the main thing - the breathtaking beauty of the nature of South Africa. For the incredible views of the confluence of two oceans from the southwestmost point of the planet, the Cape of Good Hope (the southernmost point is the other, the Cape of Needles), for the sake of exploring African penguins, for surfing and swimming, for an exciting safari in the habitat of the Big Five animals elephant, lion, leopard, rhinoceros and buffalo, thousands of tourists arrive in South Africa annually (2.3 million in 2021). Some of them eventually fall in love with these places and stay forever.    

South Africa occupies quite extensive territories (in area like two France), and the climate in different parts differs. Off the coast it is similar to the Mediterranean, inland it is moderately continental. It is cooler at the southwestern tip from the Atlantic Ocean than at the southeastern tip from the Indian Ocean. The average temperature in Durban is almost 6 °C higher than the air temperature at the same latitude on the Atlantic coast.Summer in South Africa lasts from November to March. The weather is hot during these months, but it also rains. Cape Town receives a lot of precipitation in winter (from June to August).

And to top it off, a bonus. Infections typical of Africa are not common in South Africa, special vaccinations are not required.

The South African Way

The history of the struggle of the non-white population of the South African Republic against apartheid – the state policy of segregation of people of different races living in the same territory – stirred the minds and hearts of caring people around the world at the end of the last century. The leader of the protest against racial discrimination, Nelson Mandela, who served 27 years in prison, triumphantly released and won the presidential election, became a symbol of an uncompromising struggle against injustice and, in fact, victory in this struggle. It looked at that time like a fairy tale with a happy ending, but after a while it turned out that there are still no quick and unambiguous solutions to confusing issues.

The ill-fated apartheid fell a quarter of a century ago, but nevertheless, social problems, which are still mainly racially motivated, have remained unresolved. The country's cities are divided into contrasting zones - civilized areas that easily compete with European and American ones (and sometimes win in it), and so-called townships - territories where the poorest strata live, often without electricity and amenities, and where it is not worth it to meddle with a tourist. Of the country's 60 million people, 19.9 South Africans live in slums (they are called rural areas or locations here), about 20 million more live in very poor neighborhoods and only 20 million live in civilized conditions. Of course, such a stratification cannot but create a certain tension in society.

It is worth noting that there is no division into "white" and "black" districts, as under apartheid, of course. In good locations, there are many people with black skin color who have reached a high social position. These are managers, businessmen, doctors, accountants and so on. But the fact that most of the residents of the poorest neighborhoods are non-white is a fact.

The Republic of South Africa is a large interracial, interethnic, multicultural cauldron. Racial diversity is represented by whites, blacks, colored (mestizos) and Asians (descendants of Indian and Indonesian slaves brought here by the British). Add to this the fact that the black population belongs to different tribes, and the white belongs to different stages of colonization: Dutch (their descendants are called Boers, but it is more correct to say Afrikaners), French (Huguenots fled from oppression at home) and British. The Dutch settled in this part of the continent first, then, a century and a half later, the British landed here with the intention of ousting them and partially ousted them during the Anglo-Boer Wars, which gave mankind the idea of digging trenches and fighting in khaki uniforms.

As you can see, the mess brewed by history in this place can leave far behind the ethnic contradictions that excite other parts of the planet. One of the things that undoubtedly unites South Africans is rugby. After the victory of the South African national team at the recent World Cup in France, the country declared a national day off. By the way, the South African team is the only one in the world who has managed to take the cup four times already. 

Yes, the government has not been able to overcome poverty and stratification so far, but a lot of things are going well in the state, both thanks to resources and thanks to purposeful efforts. 

As our interlocutors who have lived here for decades tell us, it is safe to stay in the country if you deliberately do not go to disadvantaged areas. "None of the visitors go there, because there is nothing to do there." To feel more confident, at first it is better for a foreigner to rely on someone who knows.

Real estate market trends

After the collapse of apartheid, South Africa experienced an economic upturn, one of the manifestations of which was the boom in the real estate market, which lasted from 2000 to 2006. At that time, housing prices were rising by an average of 20% annually. The trend peaked in October 2004, when annual price growth was 35.7% (32.5% in real terms). There were several reasons for market activity, including the emergence of a financially stable black middle class, the return of capital from abroad, mortgage lending reform, and the restoration of stability and security.

However, the situation changed after the global financial crisis. From 2008 to 2009, prices for apartments and houses decreased by 3.2% (-16.5% in real terms). From 2007 to 2021, house prices in the country increased by about 69%, but adjusted for inflation actually fell by 19%. Then in 2022, nominal prices for apartments and houses increased by a modest 2.9%, but decreased by 4.28% in real terms. According to analysts at Global Property Guide, South Africa's real estate market has been sluggish over the past few years, mainly due to high unemployment, low household incomes and an underdeveloped mortgage market. By the way, the FIFA World Cup, which took place in the country in 2010, did not have a significant impact on the overall downward trend.

According to the Statistics Bureau of South Africa (Stats SA), the growth in real estate prices in Cape Town is much higher than in the whole country. From 2010 to 2022, housing in the resort rose in price by 141% in nominal terms, ahead of other megacities.  

Today, the activity of buyers in South Africa is still low, which is due, among other things, to an increase in mortgage interest rates. The volume of housing construction is decreasing. Forecasts FirstNational Bank's outlook for the coming months is still disappointing. The weakening of the housing market is likely to continue due to a slowdown in GDP growth (2021 - 4.9%, 2022 - 2%, forecast for 2023 - 0.9%).

It should be noted that the figures are different in popular tourist locations. As usual in this area, you need to know which places will develop and invest in them. In short, it is possible to see the capitalization growth of your facility if you correctly approach its choice, despite the general market sentiment.

The coastal areas of the country, especially Cape Town, have been in the sights of foreign investors for many years. The peak of foreigners' activity occurred in 2008, when their share in the total number of transactions amounted to 6.5%. In 2023, non-residents account for only 3.7% of real estate sales. People with passports from other countries are less likely to purchase apartments and houses in South Africa for many reasons, including the negative experience of closed borders during the pandemic, although, given the fall in the rand against the dollar and euro, such purchases are now much more profitable than 10-15 years ago (from September 2011 to September 2023, the national exchange rate currencies fell from 7.58 rand to 18.97 rand per US dollar).

Most of the foreign investors in real estate in South Africa are Europeans: mainly from the UK, as well as Germany, Italy, Holland and France. Buyers come from African countries such as Mozambique, Zimbabwe, Angola, Cameroon and Nigeria. Chinese and Emiratis are interested in sites in Kwazulu-Natal and the Durban area. Many major players come from these countries, investing in the construction of hotels and other facilities.

Some foreigners buy housing in order to move, open a business here or get a job (the salary level of doctors, for example, is high). But most Europeans have an investment goal. The income from renting out real estate is higher than the average, which is actually received in other countries.

According to the Global Property Guide, in Johannesburg, the gross yield from renting apartments varies from 9 to 16%, while in the 3rd quarter of 2023, the average for the city was 12%. In Cape Town, this figure is lower and ranges from 5 to 12%, with an average of 7.5%. In Durban, rental housing yields from 7 to 12%, with an average city rate of 10%. In Centurion, the gross rental yield is from 10 to 12%, with an average city rate of 11%.

In Cape Town, coastal housing is usually used for daily rent. In summer, in high season, for foreigners, and in winter for locals. Villas in a good location further from the ocean are profitable to rent for a long time.

Russian investors and buyers from other Russian-speaking countries have been on the South African real estate market before, but, according to local media, their presence has become more noticeable in recent months, especially in the elite and premium segments, which are represented here in a high-quality and diverse way. Russians are probably attracted by the ease of making payments, among other advantages, despite the fact that in many other countries large purchases have become more complicated due to sanctions.   

More affordable offers of quality housing in South Africa are also available. The budget for the purchase of a studio in Cape Town in a good area closer to the sea starts from $60,000, 1-bedroom apartments from $80,000, 2-bedroom apartments from $100,000. A studio further from the coast will cost from $50,000.

Regions of South Africa and housing prices

Cape Town and the Western Cape

The country is divided into nine provinces: Western Cape, Kwazulu-Natal, Northwestern Province, Mpumalanga, Eastern Cape, Free State, Gauteng, Northern Cape, Limpopo.

The most popular tourist center of Cape Town is located in the Western Cape. In addition to the Atlantic, the city has two of the most recognizable natural attractions: Table Mountain, which, thanks to its truncated top, resembles the table itself, and Lion's Head Mountain. Robben Island is also notable, famous for the fact that Nelson Mandela was imprisoned there. 

The beauties of Cape Town attract filmmakers. Films and commercials are often shot in the city, and many locals have tried themselves as actors.

Most of the development goes along the ocean. Residents of the coastal areas enjoy the views of the waves and rocks. There are also areas further from the water, but near the forest, and they have their own fans.

About 60% of Cape Town's housing is owned by foreigners.

There are many historic houses with expensive, exquisitely furnished apartments in the city center. This type of housing is commonly called heritage here. However, the offer of luxury and premium real estate in new homes is diverse. For example, luxurious a spacious apartment with a private pool and stylish surroundings, located in a new low-rise complex by the ocean, costs $950,000.

Gorgeous 5-room villa with a garage for 6 cars on the coast for sale for $1.632 million

Realtors recommend paying attention to the new Blauberg district, located at the western tip of the city opposite Robben Island. This location is only a 25-minute drive from the center, and real estate prices are 2 times lower.

Another compact oceanfront house is listed for $180,000.

Johannesburg

Johannesburg is considered the economic and financial capital of South Africa. It is the largest metropolis in the country. It is located inland and surrounded by forests. The headquarters of large international and national companies are located here. 

There are many high-rise buildings in the city center, as well as many old buildings in the colonial style, and new construction is underway.

The most attractive areas of Johannesburg are in its northern part, including suburbs such as Dunkeld, Hyde Park, Houghton, Illovo, Inanda, Melrose, Parkhurst, Parktown, Parkview, Sandhurst, Saxonwold and Westcliffe. Nelson Mandela's family has a house in Houghton.

Real estate in South Africa for foreigners

Foreign citizens have the right to buy any property in the Republic of South Africa. The market is well regulated, transactions are safe. There is no tax on the purchase of an apartment or house, and a tax of 13 to 27% is provided for the sale. When renting out, it is necessary to pay income tax on a progressive scale (from 18 to 27%, depending on the income that the object brings).

Russians have been paying more attention to this country lately. As our interlocutors tell us, Russian speech is increasingly being heard in restaurants and cafes. One of the reasons is the really warm attitude towards people from Russia, both from the black population and from the white one.

There are currently no direct flights to South Africa from Russia. Tourists usually fly to Cape Town or Johannesburg today with a transfer in Doha or Istanbul. Such a trip takes about 19-24 hours. Round-trip tickets cost from $900-1000.

Russians can stay in South Africa without a visa for up to 90 days, which is very convenient.

For those who are interested in staying longer, there are several ways to obtain a residence permit. When installing onработу в местную фирму оформляют Critical Skills Visa. Для желающих открыть компанию на родине Илона Маска предусмотрена Business Visa. Есть также Retirement Visa для обеспеченных пенсионеров и людей, имеющих пассивный доход.

Благодарим за помощь в подготовке статьи эксперта компании RENTSALE по продажам недвижимости и иммиграции в ЮАР Дариуса Яковчука, а также руководителя агентства RENTSALE Юлию Титову и агента по недвижимости Дениса Иващенко. 

Источники:

Global Property Guide. Price history

Global Property Guide. Price trends

Stats SA

News24

Business Live

Worldbank.org

PPRA

Statista

Использованы фотографии: depositphotos.com