Most housebuyers obsess over prices per square foot, stamp-duty rates, estate agent’s fees, conveyancing costs and potential service charges. Wally Dove cares little about these — but ask him about currencies and he’s off at a clip, scarcely pausing for breath.
“In summer 2015, when my wife, Bridget, and I started looking to buy in the Cape, there were 19 rand to the pound. Just before Christmas, it fell to R24. I decided to purchase all the currency I needed at R22, because I reckoned the rand would strengthen a bit. It’s now close to R21 to the pound, so I am about 5% ahead.”
Dove is not the only walking, talking foreign-exchange calculator in Cape Town. Wander around the hotels and estate agencies in fashionable Camps Bay, or in Stellenbosch and Franschhoek, in the heart of the winelands, and you’ll hear Britons, Germans, Swiss, a few Dutch and the odd Italian attempting endless long division in their head.
The rand has plummeted in value against the pound, the euro and the dollar in the past year, falling by as much as 30% to its lowest-ever level. The collapse in commodity prices on which the South African economy depends, downgrades by the ratings agencies, government corruption, cronyism scandals and President Zuma’s recent decision to fire his admired finance minister and replace him with an unknown — before getting rid of him, too, and installing a third finance minister in five days — have spooked the markets.
Flights to Cape Town have been as full of property investors as of the usual tourist “swallows” heading south for a little winter warmth. “I’m here because South Africa is now ‘one third off’,” David Warren said as he emerged from Cape Town airport in March and sped off in a hired Toyota, trying to ignore the vast township of Khayelitsha on his way to Bantry Bay to view a three-bedroom house that was on the market for less than £400,000.
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“This year has been the best since I started work here eight years ago,” says Doug Gurr, a former stockbroker from London who is now an estate agent in South Africa. “Brits are piling in.”
Great weather, a favourable time zone for Europeans, easy overnight flights (either direct or via the Gulf) and cheap labour and raw-material costs for those who want to self-build have long made South Africa an attractive market for investors. But the rand’s collapse has made the country almost too good to be true — financially speaking, at least.
Take the villa in Franschhoek that Dove, a former pharmacist turned property investor who lives in Portsmouth, has just bought to live in during the English winter. It has three bedrooms, a pool and half an acre of gardens. He agreed a price of R7.5m — £352,000 at the exchange rate at the time — and completed last month.
Running costs are low because utilities and labour are cheap. He estimates that it will cost just £7,000 a year to maintain the property, the pool and the garden all year round. “That’s a quarter of what we would pay in Europe,” he says.
The buzz in the market is not just because the falling rand is luring overseas buyers. Many South Africans are keen — desperate, in some cases — to sell. “There is a spike in fear in the back of some homeowners’ minds that the rand may keep on falling,” says Gurr over coffee in Franschhoek. “Some think it might be time to bail out before it’s too late.”
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Gurr works in the winelands, 45 miles east of Cape Town, where some of the most exclusive homes, farms and estates are found. He has one property near Franschhoek on his books priced at £14m, but there are bargains available, too. A two-bedroom flat in a gated community on the outskirts of Franschhoek is yours for £75,000, while lodges on the golf estates outside Stellenbosch go for £90,000.
For those who prefer to live in the city, the hottest areas are still Camps Bay, Clifton and Bantry Bay, on the Cape Town corniche. Barbara Rogers, who works for Pam Golding, the largest estate agency in South Africa, says the cheapest two-bedroom flat in an old block on the Atlantic seaboard will set you back £200,000. Prices rise to £3.5m for a top-end property with ocean views. Those who want better value should head for Hout Bay or the southern suburbs around Claremont, where houses start at £250,000.
With the local food and wine as good as ever, it’s easy to get so carried away that you forget South Africa remains an emerging market in the poorest continent on earth. “Our friends enjoy reminding us that we’re mad — they tell us we will be shot, stabbed, robbed and burgled,” Dove says.
The crime rate remains depressingly high. Muggings and car-jackings are still so common that hire firms warn new arrivals at the airport to leave a big gap between their car and the one in front when they stop, so they can make a hasty getaway if necessary. Estate agents use euphemisms such as “mixed community” to warn investors off buying in areas that they consider unsafe. (This is the new South Africa, where overt discussion of race is taboo.)
Security is one reason the winelands are attracting so many buyers. “There are some dangerous places in the city,” Dove says. “But Franschhoek is nice and quiet, and — bluntly — there are not a lot of townships around it. Also, we’re on an estate that is surrounded by a security fence, with a gatehouse. Our house has an electric fence. We have lots of alarms. We feel safe.” Some buyers, though, are put off by the need for fast-response security patrols, burglar bars and alarms.
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Then there is the big question. Will South Africa remain a democracy and the second largest economy on the continent, after Nigeria? Some analysts argue that the growing political instability and the emergence of extreme left-wing radicals — notably Julius Malema, the firebrand leader of the Economic Freedom Fighters, who argues that assets owned by white South Africans and foreign investors should be expropriated to boost equality — herald dark economic days ahead.
Simon Kneel, a former lawyer with Freshfields, moved to South Africa in 2000 and now manages a portfolio of more than 200 holiday properties in and around Cape Town through his firm, Cape Portfolios. He says he “loves living in Cape Town, because it still offers a fabulous lifestyle and great value for overseas buyers”, but concedes that “there is an element of risk, and there are concerns about the future”.
Dove has studied Malema’s blogs and admits: “They are not pleasant reading for people like me.” Yet he feels his investment in Franschhoek is secure: his neighbours include some of the richest South Africans in the world, among them Johann Rupert, chairman of the luxury-goods conglomerate Richemont, which owns Cartier and Dunhill, and the golfer Ernie Els, who has a vineyard.
Other local buyers include the jeweller Laurence Graff, who owns the spiffy Delaire Estate, Sir Richard Branson, who recently bought the Mont Rochelle resort, and leading new-money South African billionaires, notably Tokyo Sexwale. “There is a lot of old and new money here,” Dove says. “I don’t think they would be here if they thought there was a political or economic threat.”
Still, he’s not taking any chances. “Bridget and I are not sinking our life savings into this house. If South Africa went the way of Zimbabwe, I would be OK about walking away from £350,000. I certainly would not invest more than £1m here — losing any more than that would annoy me. I would forget about it. After a bit.”
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That’s the right approach, Gurr says. Political risks, market dips, currency fluctuations and rental yields of about 5% mean investors should not look to make money in South Africa. “You come here to enjoy a good and healthy life — and for ego and prestige,” he says. “I always tell overseas buyers to keep half the money in their home country for income and as a hedge. I’ve got a house in Surrey — just in case. But for now, I’m staying here. Why wouldn’t I?”
Property for sale
Stellenbosch £850,000
Looking to whittle down your handicap? Head to the 740-acre De Zalze Winelands golf estate. With 448 luxurious homes spread across 14 ‘villages’, and a mountain backdrop, the secure estate is centred on a clubhouse above the Blaauwklippen River. This five-bedroom house has a chef’s kitchen and a private pool with decking. 020 7016 3740, savills.com; pamgolding.co.za
