Wind of change blows the rich away

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The suburb of Westcliff in Johannesburg, where mining magnates first settled in grand estates more than a century ago, has lost some its lustre as more of South Africa's ultra-rich move their money into prime locations in Cape Town or abroad.

Fewer homes in the sought-after neighbourhood have sold in recent years, with only one property valued at more than R20-million sold this year. That went for R37-million.

Five sales

According to data by Lightstone Property, there have been five sales with the median value of R7.53-million in Westcliff this year. This is based on deeds office data, which have a three-month lag. Last year 12 properties were sold in the suburb compared to 18 in 2015 and 24 in 2014.

Westcliff lies on the Parktown Ridge, just north of the city centre, and the best properties have commanding views stretching as far as the Magaliesberg to the west.

Westcliff and adjacent Parktown host some of the most extravagant properties in Johannesburg — with large, terraced gardens and grand old mansions where some of the country's top businesspeople live.

Some of the suburb's homes were designed by British architect Sir Herbert Baker, famous for the Union Buildings, among other South African landmarks.

Brian Gilbertson, former CEO of mining giant BHP Billiton, named his private equity group, Pallinghurst Resources, after the road in which he lived in Westcliff.

But the pool of buyers, which has never been a large one anyway, has shrunk further.

Confidence

In Johannesburg and Pretoria, high-net-worth individuals with low levels of confidence in the region were voting with their pockets, said Samuel Seeff, chairman of Seeff Properties.

"Most people who would want to make that sort of investment [over R20-million] would want to do so with the assurance that over a period of time they would get capital growth. What we are seeing now is real concern ... People are worried they may not get their money back."

Seeff said crime, corruption and poor service delivery had forced property buyers to consider where Johannesburg might be in 10 years' time and whether their properties would retain value.

Jonathan Kohler, CEO of Landsdowne Investment Properties, said buyers were showing no interest in properties between R19-million and R21-million at the Blair Atholl Golf Estate near Centurion, Pretoria.

"When you look at people who can spend R20-million ... they're thinking: 'Do I really want to invest R20-million of my money in a fixed asset in this country where I don't really know what's happening from a political standpoint?'"

But Richard Smith, manager of Pam Golding Properties in Hyde Park, Johannesburg, said homes in Westcliff enjoyed a high degree of owner stability, with families holding onto their homes for many years.

"In some cases properties are passed from generation to generation. According to Lightstone, 72% of owners have retained their homes in Westcliff for five years or more while 56% have lived in their homes for over a decade."

There were 11 homes over the R18-million mark for sale in the area of Friday, as listed by Property24.

Smith said Westcliff's geographical desirability and prestigious history made it difficult to compare to other upmarket Johannesburg suburbs. He did not think the market was in decline. "While the property markets of some regions [in Johannesburg] have slightly tapered off, the right home at the right price will always sell and, despite the current economic conditions, property is still a robust investment overall."

Smith said that during lean times sellers at the higher end of the market tended to hold onto their properties until they could get the price they wanted.

John Loos, FNB household and property sector strategist, said overall the national property market had slowed.

"The whole Gauteng market and, according to our calculations, the national market as a whole, have been seeing volumes decline. Gauteng has slowed from two to three years ago. It's a function of the national economy, which has slowed."

Lightstone Property data showed that the upmarket Johannesburg suburbs of Sandhurst, Hyde Park and Houghton Estate each had one property sale over R10-million by the end of May this year.

In the five months to end-May 2016, four properties valued above R10-million sold in Sandhurst, Hyde Park had six sales and Houghton Estate had five.

Residential estates such as Steyn City in Johannesburg seem to have escaped the doldrums affecting traditional suburbs.

The Cape Town property market, however, remains hot as South Africans semigrate to the Mother City. Loos said there had been an outflow of affluent repeat buyers from Gauteng, while the Western Cape had seen an influx. "As far as the big metros go, Cape Town offers a relatively good lifestyle and the wealthy look for that lifestyle. That has supported Cape Town and the surrounding Western Cape quite strongly."

Property economist Erwin Rode said retirees as well as economically active South Africans were flocking to Cape Town, where the economy, driven by tourism, real estate and agriculture, is arguably better off than the rest of the country.

But since the cabinet reshuffle in March, the number of wealthy South Africans looking for offshore property investments, which can bring foreign residency rights or citizenship, has increased.

Jacques Scherman, a vice-president at Arton Capital, which advises clients on citizenship-by-investment programmes, said there had been a spike in inquiries from South Africans in recent months.

"I think the reason is that people are worried about their money, they're worried about the country.

"Every time something happens the rand either shoots up or shoots down and there's just too much uncertainty. People who do have cash want their cash outside of rands. They want it in US dollars or euros."

Wealthy South Africans can secure a residence permit in Portugal, for example, by buying property with a value of at least €500,000 (about R7.3-million). Cyprus, Malta and several Caribbean islands run similar programmes.