Property investment in Cape Town

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beekeeper

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I am just back from a trip to Cape Town which which was part holiday and part an investment research trip. Following my trip i am extremely confident in Cape Town as an investment location and am now looking at buying a property on the Western Cape (Haut Bay) as an investment and also for personal use. I feel there i so much unrealised potential in S.A. especially with the World Cup there in 2010. Please discuss.
 
Realistically, what long term effect do you think a 4 week long football tournament is going to have on domestic property ?. Apart from an increased chance of a couple of week's rental (depending on proximity to stadiums) I don't think it has any bearing on the market.
 
beekeeper said:
I am just back from a trip to Cape Town which which was part holiday and part an investment research trip. Following my trip i am extremely confident in Cape Town as an investment location and am now looking at buying a property on the Western Cape (Haut Bay) as an investment and also for personal use. I feel there i so much unrealised potential in S.A. especially with the World Cup there in 2010. Please discuss.
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For starter's I'd presume it's Hout Bay. Beautiful place. Been there. Great area. Loved it. Got three sets of friends located nearby, although I don't live there myself. Any more details to whet our appetites?

Now for the investment side: who are your target tennants (assuming you are going to let the place out to generate income)? I would have thought the winelands/Stellenbosch was the more obvious location for short term holiday lets, plus the possibility of leasing to a rich-kid University student. SA salaries, even for ex-pats, are not what I would term generous. Two of my friends let cottages and easily cover costs, but it is not serious money. They do it mainly to pay for the upkeep of the places.

What is your view on the South African Rand, possible double digit inflation, and are you happy with serious fluctuations in euro value: range of 7.5 - 10 per Euro in a year = +33% or -25% depending on when you step in even within a twelve month period.

How are you going to get the capital in, and more importantly out of the country, if you make a huge profit on capital gains?

How are you going to arrange security? Via a private firm? How much does that cost? Are you happy with "Armed response" notices on your garden wall?

Have you been there in Winter? It can be ***** cold and not many places have central heating or double glazing.

I'm not trying to put you off at all. Just thought I'd ask some of the harder questions, and I'd be very interested in the answers for my own enlightenment from an investment point of view. For personal use I'd have no qualms.
 
Firstly appreciate all comments. I spoke to alot of people today regarding my ideas and the feeling i am getting is that it would be more manageable to buy a property in Cape Town itself. Cape Town is a city on the move and reminded me od Dublin prior to the investment in Temple bar etc, has been voted oe of the worlds best touriset destinations as well as South africas premier attraction.

The most attractive proposition from an investment perspective would be an apartment in Cape Town with a rental agreement with a management company. Most of these agreements come with a months use for the owner p.a.

With regard to the currency my personal feeling is that the Euro is close to its highs v's the USD, max 1.60, but can see a move back down towards 1.10/1.20 over the coming 3/5 years. The Zar is very strong v's the USD and should remain so as it is linked strongly to commodity prices which i only see going one way. The only chance of a major Zar depreciation, in my eyes, is political uncertainty. MY personal feeling again is that the country has seen some dramatic changes and is only movin in one direction.

Any thoughts ?
 
My advice would be to steer clear BIGTIME.The currency is extremely volatile, crime rates are through the roof and exchange controls make getting money out of the country very difficult. I've been there many times and have friends who I played rugby with down there too. All are sending money illegally out of the country for fear of what will happen there. The general consensus is that even though Mandela is out of power, he is the conscience of the government. When they try and introduce bizarre legislation he actually rings them up and tells them not to do it. The fear is what will happen when he dies. I've looked at investing many times and believe me it's a terrible idea.Steer clear
 
BigRog said:
Realistically, what long term effect do you think a 4 week long football tournament is going to have on domestic property ?. Apart from an increased chance of a couple of week's rental (depending on proximity to stadiums) I don't think it has any bearing on the market.
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I would disagree with this statement.

Big Rog - you are right in that it is just 4 week football tournament.
However - I don't think you should view it as the potential spin off from the actual tournament itself but rather it should be viewed as a vote of confidence for the country as a whole in being allowed to host it.
i.e. don't look soley at the results of hosting it - look at why it was allowed host it in the first place.

I will go along with what another poster said - the currency is WAY too volatile. It will end up being primarily a currency gamble with the property gamble ending up being reduced to being just a side bet.
Unless you are borrowing in rand then forget about it (I think you can only get 50% LTV as a foreigner anyway).
And even if you are purchasing in Rand presumably you will want to change it back to euro at some time in the future.

So - in a nutshell I wouldn't go near it with a barge pole.
 
I would agree with John Rambo.

Firstly, the gap between rich and poor has widened since '94. Although the blacks are now IN government, the whites run the economy (this was the terms agreed between Mandela and the white minority for them to step aside).

Secondly. how competent is the current president? When recently asked if he would take a HIV test on live TV (to make it less of a taboo) , he refused - the Minister for Health also refused.

What I'm getting at is that there is a lot of real problems in South Africa, and the biggest one being the ruling elite doesn't give a damn about its own people. Some day, the majority will rise up and take what is rightfully theres.

Yes, you could make money on property in the short term (3-8 years), but thereafter the risks increase
 
I run a relocation company in Cape Town and i moved here from the UK 3 years ago, i am originally from Dublin.All of my clients are from overseas and about 90% buy property.

This year has been my busiest year to date and remember that i represent the buyer i am not an real estate agent. There is huge demand for coastal property here and the prices are continuing to rise.What saddens me is more and more people are coming over here and paying far too much for property, take the new mandela rhodes apartment block built by eurocape(irish company), a large % where sold to irish buyers who cannot sell them as they are overpriced.I have had 4 emails from irish buyers asking me if i know of anyone who is interested in buying their units.

I had to reply to this after reading the nonsense written particularly from rambo and exchange controls.

1. Exchange controls are relaxing year by year and as an overseas buyer you can take out all the investment including capital gains as long as you follow 2 simple rules, one is that the money has to have a paper trail coming into the country and secondly you need to pay capital gains which is currently 10%.

2.Almost all of my clients borrow 50% LTV here to protect them against any currency fluctuations, it is cheaper to borrow in ireland with rates at 5-6% compared to SA with 12.5%.

3. Stay away from any off plan developments unless you know the developer and you know that you are not overpaying.

4.The new buzz here is fractional ownership which ,means you pay for a fraction of the property and they offer you 4 weeks usage per year, again crazy as it is a way for them to jack up the prices.

5.Hout Bay is a superb location, it is good value because they have had some crime issues over the years however this has been reduced as they have implement a new neighbourhood watch scheme.Do not buy apartments here as there are too many and you will not be able to rent them out.

Having armed response signs on your walls is normal practice here and yes there is crime however i feel safer here than i did in London and i have brought my family here as well.If my alarm goes off i have an armed response unit at my house within 2 minutes..nothing wrong with that

So please stop coming up with nonsense and hearsay unless you have lived here and you know the place and have experienced it, gossip and ignorant comments do not help.
 
I was in Houts Bay the day before yesterday so it's not hearsay or nonsense...what about the shanty town at the roundabout? It would appear you've a vested interest here in promoting SA property, wouldn't you agree?Your assertion that SA is safer than London is highly questionable also. Having been there many times I've never felt unsafe but I've certainly felt less safe than in Ireland or the UK.As for the "lack of currency risk" what about the continuing weakening of the rand for investors based in Ireland?And on exchange controls friends of mine have had major issues moving money. Plus, and significantly South African friends of mine are syphoning large amounts overseas by foul means or fair for the dark days they foresee when Mandela dies.I'm not afraid of an investment punt but I wouldn't put a penny into this country and would warn others against doing so.Great holiday location though...
 
secondly you need to pay capital gains which is currently 10%.
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Remember you have to pay CGT @ 20 % to Irish Revenue. You can deduct the tax paid in SA

See [broken link removed] and in particular Q19 What happens if I sell foreign assets

Also came across [broken link removed] which may be of interest

See also the [broken link removed] which may be of interest
 
Unforunately I would tend to agree with Rambo on this issue. I know Cape Town very well having spent a good deal of time in SA, it is beautiful, cheap and a fantastic place to visit, although crime has started to play its part. As an investment you need to ask a lot of questions, especially the one about getting money out if you need to sell at any stage. A lot of my rugby pals who are actually living there talk of how hard that is. You also have to look at the flucuations in the Rand which has been radical over the years, and the increasing crime rate that means costs of security and protection is beginning to spiral. To be honest a lot of South Africans don't believe that the football in 2010 will even go ahead such is the lack of infastraucturte and concerns over security. If it is for your own use that is different, but don't bank on being able to get capital gains out of the country or a rent return that covers the mortgage. Why not think about using the money to holiday there each year instead, do you really need to own something if your are not sure about the two major ingredients of an investment namely rent and capital growth.
 
Unforunately I would tend to agree with Rambo on this issue. I know Cape Town very well having spent a good deal of time in SA, it is beautiful, cheap and a fantastic place to visit, although crime has started to play its part. As an investment you need to ask a lot of questions, especially the one about getting money out if you need to sell at any stage. A lot of my rugby pals who are actually living there talk of how hard that is. You also have to look at the flucuations in the Rand which has been radical over the years, and the increasing crime rate that means costs of security and protection is beginning to spiral. To be honest a lot of South Africans don't believe that the football in 2010 will even go ahead such is the lack of infastraucturte and concerns over security. If it is for your own use that is different, but don't bank on being able to get capital gains out of the country or a rent return that covers the mortgage. Why not think about using the money to holiday there each year instead, do you really need to own something if your are not sure about the two major ingredients of an investment namely rent and capital growth.
 
John Rambo said:
I was in Houts Bay the day before yesterday so it's not hearsay or nonsense...what about the shanty town at the roundabout? It would appear you've a vested interest here in promoting SA property, wouldn't you agree?Your assertion that SA is safer than London is highly questionable also. Having been there many times I've never felt unsafe but I've certainly felt less safe than in Ireland or the UK.As for the "lack of currency risk" what about the continuing weakening of the rand for investors based in Ireland?And on exchange controls friends of mine have had major issues moving money. Plus, and significantly South African friends of mine are syphoning large amounts overseas by foul means or fair for the dark days they foresee when Mandela dies.I'm not afraid of an investment punt but I wouldn't put a penny into this country and would warn others against doing so.Great holiday location though...
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I would agree with you on the safety matter - got mugged there a few years ago. No comparison to London or Ireland.

The reality is though that there are shanty towns in almost every town - most South Africans are use to this.

The currency can work both ways, several years ago when the market was doing well I invested in land . Only required 10% down. At the time I exchanged sterling ( ZAR20-1£ at the time). As you can imagine with growth in the region of 20-30% then with the currency strengthing by almost 50% (ZAR10-1) I made a killing. Unfortunately, I have to say that property at the top end of the market at the moment is overvalued. There are still opportunities for investment in some of Cape Towns suburbs such as Durbanville and Tygervalley. For the moment I wont go close to the residential sector in general and you are probably right that buyers should just go on holiday there.
 
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