Luxury property sparkles for cash-flush individuals

The rapid growth of ultra-high net worth individuals (UHNWI) over the next ten years will have a positive spin-off for Africa’s luxury residential property sector, with the allocation of more capital into the market expected.

According to Knight Frank’s 2015 Wealth Report, UHNWI who own at least $30 million (R371 million) in assets are expected to increase by 59% in Africa compared with 34% globally.

It is expected that the growing number of wealthy individuals will allocate more capital to property investments outside of their own countries.

The report which surveys 500 private bankers and global wealth advisers who represent over 10 000 UHNWI with a combined wealth of $1.7 trillion (R21 trillion), notes that the African continent is showing a strong investment case.

This is on the back of strong investment opportunities in the luxury property market.

Just on the performance of luxury properties, editor of the Wealth Report Andrew Shirley, says global properties showed flat growth of 2%. The African continent showed “respectable” growth of 6.5%. On an individual country basis, house price growth in Nairobi, Kenya, was flat due to the oversupply of properties.

Shirley says South Africa has shown strong performance due to the weak rand, making property attractive among investors.

South Africa has received a vote of confidence, as it is the only African country to feature in Knight Frank’s top 40 most important cities for UHNWI.

Johannesburg has reached the 28th spot, trumping cities such as Washington DC, Istanbul, Berlin, Kuala Lumpur, Boston and São Paulo.

“Johannesburg is the wealth hub of Africa and wealth in the city will grow substantially in the next ten years,” he says.

Cape Town has clinched the 36th spot eclipsing Tel Aviv, Auckland, Buenos Aires and Rio de Janeiro. 
Properties that cash-flush individuals would have a taste for would include Cape Town’s top selling property for about R44 million, situated in Bantry Bay.

Cape Town’s luxury property market also offers millionaires more bang for their buck. For $1 million (R12 million), buyers can get 204 square metres. In regions such as Monaco, Hong Kong and London investors can only get over 20 square metres for $1 million.

More to it than South Africa

South Africa – which has been described as the gateway to Africa – is not the only country courting the attention of investors. Shirley says markets like Kenya, Ivory Coast, Nigeria and Tanzania are also attractive for investors.

The research pegs the growth of UHNWI in South Africa over the next ten years to 46% while markets like Nigeria and Ivory Coast boast 90% and 119% respectively.

Head of international private clients at Standard Bank Deon de Klerk says in the report: “Africa has the highest potential for growth of any region at the moment.”

African-based millionaires will also be part of the continent’s luxury real estate investment. On average about 21% of the wealth owned by Africans is accounted for through primary and second homes in Africa and about 23% are said to buy another property in 2015.

When gauging attitudes, about 90% of African respondents noted that they will be richer in 2015 and 82% of global respondents agreed.

Factors which will impact their wealth creation of African millionaires includes the tax dispensation, wealth succession as the second and third generation seem to squander wealth and political interference on how wealth is created.

http://www.moneyweb.co.za/investing/property/luxury-property-sparkles-for-cash-flush-individuals/