High End Luxury Property (The Bugle)

Every year the London based property consultancy, Knight Frank, publish a fascinating Wealth Report, which provides detailed insights into the investment behaviour of the world’s High Net Worth Individuals (HNWI’s). To be classified as a HNWI you require net wealth of US$30m. The figures provided show that globally there are approximately 190,000 HNWI individuals. Of these 66,000 or 35% are North American based, 54,000 come from Europe and 44,000 from Asia. Latin America has 15,000 HNWI’s and I am sorry to say that the whole of Africa only has 2,488. Interestingly the bulk of the forecasted growth over the next ten years comes from Asia and Latin America. Knight Frank predicts that the number of HNWI’s will increase by 50% over the next ten years. This huge increase will have a direct impact on a range of luxury asset classes, including the demand for luxury high-end real estate. The top ten countries for US Dollar based billionaires includes, in order, the US, China, Germany, UK and India as the top 5. The next five, in order, are Russia, Hong Kong, Switzerland, Brazil and (surprisingly) Indonesia. As a frequent visitor to Indonesia in the past, I always considered it more third world than South Africa and yet it has rocketed up the wealth rankings. Brazil is expected to shoot up to position 6 over the next ten years, and Indonesia is expected to take over from Switzerland over the same period. The US is however predicted to firmly retain its top position (by far) as the country with the most billionaires.

To track the demand for high-end luxury residential property, Knight Frank created the Prime International Residential Index (PIRI) which tracks 80 prime residential markets around the world. The latest published figures reveal that the top two positions were taken by Jakarta and Bali in Indonesia with price growth rates of 38.1% and 20% respectively. The next three high growth markets were Dubai (20%), Miami (19.5%) and Sao Paolo in Brazil (14%). Did any South African city feature on this list? Yes, Cape Town ranked joint 28^th with Kuala Lumpur both showing 1% growth. Not that bad when you consider that only 32 of the 80 markets showed positive growth, with the balance showing zero or negative growth. The analysis of price ranges per sqm. is amazing. Monaco topped the list with a range from US$57,600 – US$63,700. Imagine paying close to R700,000/sqm. for a property? Hong Kong and London represent almost as crazy pricing taking positions two and three on the list of the top 20, with rates per sqm. of up to US$54,400 and US$46,300 respectively. Cape Town, as the only African city to feature, ranked 20^th (just below Dubai) with rates per sqm. of US$5,500 to US$6,100. An international investor considering a decision between Cape Town and Dubai would find the pricing very similar. Having visited Dubai several times, for me it would be a no-brainer to choose Cape Town. However for your average Russian buyer, Dubai seems to tick all the boxes in terms of a high-end residential investment destination. In Cape Town US$ 1m will buy you on average 172 sqm. of space while at the other end of the spectrum the same amount only buys 16 sqm. in Monaco. In Zimbali the same US$1m will buy you a new modern 500 sqm. 4 bedroom villa fit for royalty. A recovering International residential property market is good news for South Africa and the momentum in our market is already being felt by local estate agents.

Published in The Bugle, 22 Jan 2014, Author: Andreas Wassenaar