Slight Rise in Foreign Home Buyer Confidence

FNB Property Strategist - John Loos - reported that foreigner buying interest has risen slightly in the first quarter of 2017 compared to the first quarter of 2015 and 2016. This increase could be an early indication of an improvement in foreign home buying confidence in South Africa. The 1st quarter 2017 Estate Agent Survey marked a slight increase in the percentage of buyers believed to be foreigners, up to almost 5% of the total number of buyers recorded. Although small, astute agents have noticed the increase.

When asked whether they’d experienced a rise in the percentage of foreign home buyers over the last year, the majority of agents reported that the number had remained largely unchanged, with an inclination towards improvement. Based on their response, FNB uses the information to populate an index scale - what it refers to as the Foreign Home Buyer Confidence Index.

This Index gives a rating of between -2 and +2 when estimating buyer confidence. According to Loos; “The 1st quarter 2017 Foreign Home Buyer Confidence Index rose to +0.09, from a previous quarter’s level of -0.016.” . Award-winning author and financial journalist for BizNews.com, Jackie Cameron, states in a recent article: “A currency’s value reflects the sentiment global investors have towards a country’s assets.” Investment value dropped sharply in response to several questionable presidential decisions following the firing of Minister Nhlanhla Nene in December 2015, the subsequent appointment and firing of David Van Rooyen, and reappointment of Minister Pravin Gordan. After months of uncertainty and poor investor confidence, the SA market has begun an arduous turnaround towards recovery. The Rand has seen a steady, albeit significant, uptrend since a record high of R16.84 to the Dollar in January of last year.

Over the last year the Rand has continued to perform and currently defies the R13 to the US Dollar mark, at R12.54. Paul Hansen, Retail Investment Director of Stanlib, confirmed that “for now the rand’s uptrend appears to be firmly intact.”   Other factors, such as a slowing consumer price inflation rate and a tapering current account deficit (the lowest in almost six years) have contributed favourably to the appreciation of the Rand against the US Dollar. Although perhaps too soon to tell for certain, the slight appreciation in the Rand and the rise in foreign investor sentiment appear to indicate an improvement in the economic climate. . This bodes well for home owners and prospective sellers! .

 “The strengthening in the Rand ... reflects some improvement in investor sentiment towards South Africa off a low base, and it could be this mild improvement that is not only being reflected in the Rand but also in the housing market in terms of a small strengthening in foreigner demand.” Loos   With indicators pointing towards a more positive year going forward, sellers are cautioned to remain realistic. Demand for quality, market-related property continues to dominate the sales market!

The rise in foreign home buying confidence comes amidst sluggish global economic growth, and so it goes without saying that momentous change will take time. Sellers must seriously consider whether their property is competitively-priced given the current market to ensure that it does not sit for months on end without any solid offers.  

Loos J, Property Barometer, Residential Demand Conditions, Home Buying By Foreigners (March 2017)