House sales spike as emigration soars
Emigration-driven housing sales may have reached 10-year highs in SA, but living costs here are still far cheaper than in many other cities across the globe
The number of South Africans leaving the country for greener pastures has risen sharply over the past 18 months, new research suggests. The number of SA home sellers who cite emigration as the reason for placing their property on the market nearly doubled from 7% in the fourth quarter of 2017 to a 10-year high of 13.4% in the second quarter of this year, according to the latest FNB Estate Agents Barometer.
Interestingly, the rise in emigration-driven housing sales is no longer only prevalent in upper price brackets — typically R3.5m-plus — but has also spilt over to the lower and middle segments of the market. Over the past year alone, the number of sellers looking to offload properties priced below R1.6m because they were emigrating jumped from 4.3% to 10.6%.
FNB economist Siphamandla Mkhwanazi believes the trend can partly be explained by upper-income owners disposing of buy-to-let investment properties.
FNB figures point to another worrying trend: the number of South Africans selling to exit the country has overtaken the number of sales to foreigners and expats. This has created "negative net foreign demand", which means "there are more emigration-related home sales than inbound demand, which exerts downward pressure on prices", says Mkhwanazi.
He notes that between 2011 and 2015, SA experienced strong demand from foreign property buyers and returning expats, while numbers of locals looking to emigrate were relatively low — only 2%-4% of sellers. Low emigration-driven sales, coupled with robust foreign demand, meant net foreign demand peaked at 6% by the end of 2014. By mid-2017, however, it had dropped into negative territory. And, in the second quarter of this year, it was at -9%, the lowest level on record.
Mkhwanazi believes the negative turn of events is a reflection of weak investor sentiment, on the back of SA’s multiyear economic stagnation and lingering policy uncertainty.
The exodus of South Africans offshore has also been supported by the ongoing globalisation of companies offering mobility to local staff, which has made it easier to relocate to other countries.
The advent of "golden visa" opportunities — an increasing number of countries (Portugal, Malta and Mauritius, among others) offer foreigners residency or a second passport through a property investment — has also provided more emigration options for South Africans.
Though it has no doubt become easier for South Africans to emigrate, that doesn’t mean it has become any cheaper to do so. In fact, research by German-based relocation expert Movinga shows that accommodation and other living costs in many global capitals are between three and four times more than in SA.
The company’s newly released moving price index compares the relocation costs for 85 cities. The index, priced in US dollars, provides a comparison of "landing" costs, calculating how much money an individual and a family of four will typically need in the first three months of settling into a new city.
Total relocation costs for the three-month period include rental of a temporary residence and storage for the first month, two months’ rental in a permanent letting, as well as expenses for food and drink, transport, an internet connection and phone plan.
Perhaps unsurprisingly, the US city of San Francisco, known for its sky-high property rentals, is the most expensive city to which to move, at a cost of $24,004 for a family (see table) and $13,531 for an individual.
Other cities in which a family will need to fork out at least $15,000 to cover living costs for the first three months include New York, London, Geneva, Sydney, Amsterdam and Canada’s Toronto and Vancouver. Ireland’s Dublin also features among the index’s 20 most expensive relocation destinations, surpassing Singapore, Los Angeles and Sydney.
Three-month living costs of more than $15,000 in these in-demand cities, as Movinga calls them, compare with Joburg’s relocation cost of "only" $5,433. That places the city 77th on Movinga’s cost-comparison index — the ninth-cheapest city to which to move of the 85 on the index.
Other popular emigration destinations for South Africans, such as Auckland and Wellington in New Zealand, Melbourne in Australia and Dubai in the United Arab Emirates, will set a family back $13,000-$14,000 in essential living costs for the first three months.
But Portugal’s Lisbon, which has in recent years also lured increasing numbers of SA expats due to its golden visa programme, attractive lifestyle offering and good weather, counts among the more affordable European destinations. The city is placed at 41 on Movinga’s list of cities, but is particularly well-priced in terms of food and drinks. In fact, the monthly food and drinks bill for an individual in Lisbon is only slightly more than that of a Joburg resident: $313 versus $278.
The two cheapest cities to move to, according to the index, are Istanbul in Turkey and India’s New Delhi, where the total three-month relocation costs for a family amount to $4,045 and $4,232 respectively.
If these two cities are not on your potential emigration list, perhaps Germany’s Berlin deserves a second glance. It is one of the least expensive cities in West Europe, with total living costs for three months coming to $10,895 for a family and $4,731 for an individual.
Despite Berlin’s rise as a hub for creative industries and technological innovation, single professionals can still rent a flat in the city for an average $720 a month, compared with more than a $1,000 a month for popular European capitals such as Paris, Munich, Amsterdam and Barcelona. Berlin’s relatively affordable living costs can be ascribed to, among others, the city’s residential rent-control policy.
Global companiesFinn Age Hänsel
are now competing with
each other for top talent, which means that there
are more opportunities for cross-border migration than ever before
Another key West European city in which individuals will find a decent place to live for less than in most European hubs is Belgian capital Brussels. There, monthly flat rentals for individuals average $710.
The cheapest West European city for property rentals is Marseille in France, where individuals spend an average $591 on their monthly rent. That compares with an average of $349 in Joburg.
However, unlike most of its West European counterparts, there are a number of East European capitals where flat rentals are as affordable as in Joburg. Cities where an individual can rent a flat for more or less the same price as an equivalent in Joburg include Sofia (Bulgaria), Bucharest (Romania), Budapest (Hungary) and Warsaw (Poland).
Movinga MD Finn Age Hänsel says huge conglomerates and tech companies establishing a presence in a city can also affect residential rents. For instance, the decision by internet giants Google and Facebook to set up offices in Dublin’s Silicon Docks a few years ago resulted in rapidly rising residential rentals, as an influx of top talent flocked to the city to cash in on new business opportunities.
Facebook’s Dublin office is now the company’s biggest location outside California.
In contrast, when Google planned to set up an incubator for start-up companies in Kreuzberg, one of the older districts in western Berlin, locals actively campaigned against the move. They were concerned that it would affect gentrification in the area and push up flat rentals. Google finally abandoned its plan to open a large campus in the city last year.
Hänsel says: "The difference in the cost of living between these two major European hubs goes a long way to illustrate the local impact that big businesses can have on living costs."
However, he notes that despite the rising anti-globalisation sentiment in many parts of the world, there is no sign of high-skilled migration slowing down anytime soon. "With clear demand for certain skills, global companies are now competing with each other for top talent, which means that there are more opportunities for cross-border migration than ever before."
Movinga’s index also reveals a few other interesting facts.
For instance, while San Francisco may be the most expensive city to relocate to on an overall cost basis, Reykjavik in Iceland is the most expensive place for an individual to rent a temporary home. London has the highest transport costs of all the cities, while New Delhi and Bucharest will set you back the least in terms of monthly transport bills. Canada has the highest phone costs and India the lowest.
One area in which South Africans pay more than their European counterparts is the cost of an internet connection — an average $45 a month versus less than $40 a month in London, Paris, Munich, Copenhagen and Stockholm, among others. Dubai is one of the few places where you will have to budget more for internet connectivity — at $98 a month, it’s the most expensive city in the world for internet costs.
The Movinga moving price index is available here.