Cape Town luxury property: Sellers under financial pressure, buyers looking for value on Atlantic Seaboard

Cape Town’s Atlantic Seaboard is home to many of South Africa’s wealthiest residents – and it has been a magnet to well-heeled investors from Africa and elsewhere. Some agents say that there has been a notable uptick in demand, especially from European countries. But Lance Cohen, a specialist in the area, says not so fast with the rosy overviews of luxury Cape Town properties. Get out there and start shopping; properties are cheap at the price. This is a very good time to pick up the property of your dreams. He spoke to BizNews about selling prices and volumes in this prime residential real estate sector. – Jackie Cameron

Lance Cohen on the property market:

There’s been certain reporting on an improvement in the markets. I don’t agree with that. My own personal figures seem to be relatively good, if you put them in context with last year or two years ago, the figures are not good at all. Unlike many articles that I’ve read about the property market improving, I’m one to say that the market at the moment is still in a downward spiral.

On whether it is a buyer’s market for high net worth individuals:

Undoubtedly. I think the biggest problem in the marketplace at the moment – the Atlantic seaboard, where I am a luxury market specialist – is sellers don’t really have to sell. Certainly, the buyers (predominantly) have been cash buyers. The result of that, unfortunately, is that prices aren’t coming down as much as they should be coming down.

Therefore, the amount of transactions that are taking place are a lot less than what they should be. Recently, a property was sold in Fresnaye. Initially it was marketed at R65 million, then reduced to R59 million, further reduced to R55 million and sold for R36 million.

That is an example of what needs to happen in order for the market to rerate to new levels. Then you will see volume of sales start to pick up again. Until that happens, you can be sure that nine of the 10 times [you get calls] is to list the property rather than to do a viewing. There’s a lot more property coming on the market for sale compared to property being sold.

On issues within the property market:

I think one of the problems is – certainly in good times in the property market – everybody wants to be an estate agent. It’s a good, easy way to make a lot of money. The result of that, unfortunately, is one lands up with a lot of unprofessional agents that don’t have any sense of the market.

You have sellers that are quite desperate to sell, that will try anything, and list properties at prices that are not achievable. These properties just sit on the market for a year, two years or even three years. Then, of course, you get a realistic seller. You go in and say the property is worth R30 million, and they say ‘how can it be worth R30 million if my neighbour is asking R50 million?’ What the public sees is a house that was asking R50 million. It gets sold and they think it gets sold for R50 million. They’re not seeing the actual price of R36 million that it got sold at.

On whether we will see forced sales at the top end of the market:

You’re definitely going to see forced sales at the top end of the market. People that you least expect to have to sell. It’s going to come. I’m dealing with one or two at the moment.

On foreign buyers:

Foreigners probably constitute maybe 5% of the market overall. At the high end, you might say a little bit higher – but generally about 5% of the market. With borders being closed at the moment, very few people purchase property sight unseen. There are transactions that do happen sight unseen, but they are few and far between.

I do believe that there are, at the moment, certain foreigners that came into the country. I think people would much prefer to be in Cape Town under lockdown level 3. There are a fair amount of foreigners that seem to be around. I have transacted with some foreigners recently. So yes, they they are buying. I think Cape Town and the Atlantic Seaboard is offering very good value at the moment. I definitely think that they will be more foreign buyers when the borders are open.

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