This just goes to show how different the South African picture is to anywhere else in the world. We cannot view what has happened in another country and draw direct conclusions about what may or may not happen here.
Nifty stats. Not sure about the conclusions he draws from demographics but nice to see hard data all the same.
While on the subject of demographics here's my crackpot theory of the day...
Ireland's broken economy and dire employment situation has resulted in an astonishing exodus - something like 1,000 people are emigrating every week.
Across the Irish Sea things are going pear-shaped: the "shock" UK GDP figures suggest that the UK is in for a serious double dip, and yesterday heard Chris Hart on radio saying they're in danger of going the Ireland-Spain route.
If the UK sinks into depression, what happens to the 600,000 South Africans who live there? Let's say 80% of them have put down roots and decide to tough it out. And let's say another 10% leave for other greener pastures. So let's say that just 10%, or 60,000 middle-class South Africans come back home in the next couple of years.
It's probably fair that half would head after the money in Gauteng. Of the rest, let's say 15,000 come to Cape Town and the other 15,000 spread around the country.
I don't think I've exaggerated any of these thumb-suck figures so far - 15,000 returnees to Cape Town out of 600,000 emigres doesn't strike me as impossible.
Enough to create a mini-bubble in Cape Town? Absolutely. According to the major estate agents' websites, there are currently 10,000 properties on the market. About 1,000 of these are either above or below the price-range and location that middle-class buyers want.
I know it's all guess-work but I think I've shown here that if the UK has the meltdown some are predicting we could have 15,000 buyers competing for 9,000 properties. In short a freakish demand-led bubble.
Hi BeanCounter, As one of the potential 15,000 returnees from the UK there is one important factor I'd like to mention which is not included in your analysis - jobs, especially for those of us classified as previously-advantaged. Each one of the 15,000 will require 1-2 salaries to afford the expensive Cape-Town prices. The past 4 years have not been kind to those saving in foreign currencies, so returning with wads-of-cash earned overseas to snap up bargains is something of an urban myth.
One should stick to the facts: Things do not move smoothly by 3-5 % PA it moves rapidly in spurts with long periods of nothings inbetween, for housing we are now in that nothing period. My experience do not support the poplation growth in the article, residence expansion is massive. In Cape Town and Joburg anyway. One cannot predict the future price of houses, when it comes to inflation all bets are off and it becomes a numbers game. Numbers head off to infinity, there is no limit. If you told me in the early 90's a R3K home will be worth more than R1m in 20 years I would have told you are nuts. So R75m for a house is not as impossible as it sounds. Housing is cheap in replacement terms. It's much more expensive to build a house than to buy. This situation has to correct over time. I think there is merit in BC's theory of people moving to SA. My neighbor just decided to bring his sterling to SA to buy property. Also housing in Africa is getting more expensive, look al Luanda as an example. Also SA is the gateway to Sub Saharan Africa for now, and who can live in JHB. Nuff said
@froggy - diamonds and I agree that we still have an enormous population living in temporary shelter, desperate to step up on the property ladder.
I also think that if the UK goes double dip a lot of the returnees will be escaping negative equity in property that they have bought in London. With prices crashing any nest eggs that people have saved will go towards mitigating outstanding bonds.
So lots of middle-class whiteys return to CT with no jobs and poor to no credit rating having lived overseas for 5 years? I don't see banks issuing them bonds.
With free healthcare and education in the UK, what really are they returning to here?
The lily white saffers in the UK would rather bite their tails off than return to SA. Not gonna happen. Ever. They will become "travellers" if they have to and live in a Jurgens rather than return to the country they consistantly badmouth to any drunkard Brit that will listen to the sad sad story of a coward.
The last few comments here reflect an unmeasurable factor - confidence in the future of SA. Morbid theorizing about the future has been the number on pastime of white South Africa since, well, 1652, and frankly it has now proved itself irrelevant.
One reason this theorizing irritates me a lot is that middle-class white South Africa has never faced an economic crisis. It has never been dispossessed in a war (like European middle-classes 70 years ago), it has never faced mass unemployment (like the US middle class in 1930s). It was our farmers who were destroyed in the 1930s, the working class unemployed whites who became the "poor whites": the professionals in the middle have never known a day of real suffering. I know crime is scary and that political irrelevance is irksome, but the reality is that middle-class life in SA provides some of the best quality of life anywhere in the world.
If the UK goes into a double dip South Africans living there will face conditions far worse than any Afro-pessimistic fantasy they might face back home. In the UK they will be jobless, with little or no savings, in a physically hostile environment (vicious winters, and possibly increasing social unrest, even xenophobia), with no family support group. In SA they'll have Ma and Pa's house with the pool and the braai, a far greater chance of employment, and if nothing else they'll have a support structure of friends and family.
@ Anon bitterly suggests they'd rather bite off their tales than come back. I don't think that's true, but if you read my original post more carefully, you'll see I suggested that it would only take 10% of Saffers to return to create a major bubble.
Let's not let pessimism or political gloom cloud our financial vision.
"With free healthcare and education in the UK" ??!! I have just recently returned from the UK and find that medical aid + school fees is much cheaper in SA than the enormous tax burden that the UK impose on it's working class. Sure its free if you are not working, but most Saffers in the UK are not eligible for state benefits unless they are employed.
Posted a response earlier but it's gone. In a nutshell I said that it's not wise to let Afro-pessimism cloud your financial judgment. Yes, many South Africans in the UK have convinced themselves that SA is hell on earth, but I still don't think it's a stretch to imagine 10% of them returning to SA. And that 10% has the potential to upset all kinds of property (or rental) apple-carts.
@Bean Counter Interesting theory and almost worth a wager. But, 60,000 SAFFAS leaving the UK means either (i) they don't sell there and have no or little equity to buy here, or (ii) the market gets flooded and they don't get very much for their UK boxes anyway which is very possible with clear unemployment rising in the UK anyway. So to start with I don't believe those fleeing back to SA as 'financially pressured' having lost jobs will exactly be spending on housing on arrival. Secondly, they will be having to find employment in this bizarre place where highly skilled people can sit for months with open positions where they cannot be hired becasue they are a little too pale whittling away the savings they have.
@ Anon, I would wager that almost none of my postulated 60,000 returnees own property in the UK. So remove equity from the equation. As for joblessness, yes, but I really believe most would rather be jobless here (near Mom and Dad, friends, a social safety net) than in the UK. So even if they are all broke, they'll still need somewhere to live: suddenly huge competition for limited rental properties, BTL becomes a good option again, and once again we're back at mini-boom.
@Bean Counter. Yep - I'd guess you are correct. Personally having lived in the UK for 9 years and having a family (returned to SA 3 years ago), I would rather be in the UK in a recession than in SA ... but ... I guess that depedns on your family etc.
With comments like "I would rather be in the UK in a recession than in SA". It proves that nobody can predict what other people would do in certain situations...
What you are forgetting is that many living and working in the UK have bought already if they have the intention of coming back. This is how they have been able to afford the prices and one of the reasons why they are there!
I'm one of those in the UK planning on going back to CPT towards the end of this year, so I'll comment
1. The job situation in CPT is rather ridiculous compared to the UK, even at a recent -0.5% growth. For someone in my field, software engineering, there are literally thousands of jobs, permanent and contract, in London. I recently looked on HomecomingRevolution, where there are 11 advertised, NATIONALLY. I.e. don't expect South Africans to be streaming back to CPT. JHB is a better option for many.
2. The pound/rand is now 11.43, whereas 3 years ago it was 15. That's a serious dent in savings to those coming back to SA.
3. There are a few who have bought properties in CPT over the last few years, mostly while prices were still rising. I.e. many who have plans to go back have already bought. Yes, it will probably be easier to afford large deposits from pound savings, but the repayments must come from somewhere and the dire job situation is not encouraging. And I for one would be very wary of putting my savings into property, when the future for property looks, how shall I put it, rather bleak.
4. There are some who own in the UK, but they are in the minority. And the market here is dead, so they can't sell. Or are in negative equity. I don't understand the comments that "a lot of the returnees will be escaping negative equity in property that they have bought in London". You cannot walk away from your debt.
5. Many who planned to go back have gone back already
My conclusion is that you should not expect a mini CPT bubble because of returnees. The majority of those who return, will return to where the jobs are, i.e. JHB. Most of the financiers, accountants and bankers will go to JHB.
If it's crackpot it's crackpot. Am happy to concede if the majority think it doesn't hold any water. As for being bullish, I find these days it's easier to be objective - still want a crash to prove I was right all along, but now more able to separate the newsy from the noisy.
@JDog I'm not really sure what would happen if you renege on your overseas debt, but maybe: 1. They might not let you in ever again, or arrest you on entry 2. You will never get a Schengen Visa again, or arrest you on entry 3. Other countries like the US might not let you in, or give you a visa.
So if you're content with hiding in the Africa, perhaps not much will happen...
@bbflames I'm not sure if you're trying to say you agree or disagree with me...?
@benjamin My point is that cost of living combined with a lack of jobs will make it even less attractive for those jobless Saffers to return to Cape Town. Their disposable income if they do return will be on a par or less than they had in the uk. Add to this, if they do get a job their salary will undoubtably be lower than what they will have been used to earning.
That said, anecdotal evidence suggests that many CA's have already returned. A friend who is a FD of a Cape Town based company said he would really struggle to find a new job as the competition from returnees with serious experience on their CV's are flooding the job market.
24 comments:
REALLY interesting.
This just goes to show how different the South African picture is to anywhere else in the world. We cannot view what has happened in another country and draw direct conclusions about what may or may not happen here.
Nifty stats. Not sure about the conclusions he draws from demographics but nice to see hard data all the same.
While on the subject of demographics here's my crackpot theory of the day...
Ireland's broken economy and dire employment situation has resulted in an astonishing exodus - something like 1,000 people are emigrating every week.
Across the Irish Sea things are going pear-shaped: the "shock" UK GDP figures suggest that the UK is in for a serious double dip, and yesterday heard Chris Hart on radio saying they're in danger of going the Ireland-Spain route.
If the UK sinks into depression, what happens to the 600,000 South Africans who live there? Let's say 80% of them have put down roots and decide to tough it out. And let's say another 10% leave for other greener pastures. So let's say that just 10%, or 60,000 middle-class South Africans come back home in the next couple of years.
It's probably fair that half would head after the money in Gauteng. Of the rest, let's say 15,000 come to Cape Town and the other 15,000 spread around the country.
I don't think I've exaggerated any of these thumb-suck figures so far - 15,000 returnees to Cape Town out of 600,000 emigres doesn't strike me as impossible.
Enough to create a mini-bubble in Cape Town? Absolutely. According to the major estate agents' websites, there are currently 10,000 properties on the market. About 1,000 of these are either above or below the price-range and location that middle-class buyers want.
I know it's all guess-work but I think I've shown here that if the UK has the meltdown some are predicting we could have 15,000 buyers competing for 9,000 properties. In short a freakish demand-led bubble.
Thoughts?
Hi BeanCounter,
As one of the potential 15,000 returnees from the UK there is one important factor I'd like to mention which is not included in your analysis - jobs, especially for those of us classified as previously-advantaged.
Each one of the 15,000 will require 1-2 salaries to afford the expensive Cape-Town prices. The past 4 years have not been kind to those saving in foreign currencies, so returning with wads-of-cash earned overseas to snap up bargains is something of an urban myth.
Nice work - pity he hasn't got a real price graph on the site - in my opinion that is the baby that shows us what is really going on.
One should stick to the facts:
Things do not move smoothly by 3-5 % PA it moves rapidly in spurts with long periods of nothings inbetween, for housing we are now in that nothing period.
My experience do not support the poplation growth in the article, residence expansion is massive. In Cape Town and Joburg anyway.
One cannot predict the future price of houses, when it comes to inflation all bets are off and it becomes a numbers game. Numbers head off to infinity, there is no limit. If you told me in the early 90's a R3K home will be worth more than R1m in 20 years I would have told you are nuts. So R75m for a house is not as impossible as it sounds.
Housing is cheap in replacement terms. It's much more expensive to build a house than to buy. This situation has to correct over time.
I think there is merit in BC's theory of people moving to SA. My neighbor just decided to bring his sterling to SA to buy property.
Also housing in Africa is getting more expensive, look al Luanda as an example.
Also SA is the gateway to Sub Saharan Africa for now, and who can live in JHB.
Nuff said
But I have to admit the political situation is a big/massive damper/ show stopper for long term investment like housing.
So the reason to be negative about property is not discussed in the article.
So personally I don't think I will be buying anymore property in our beautiful SA.
I recommend moveable high value assets, with small footprints all over the world. But this is not easily achieved.
@froggy - diamonds and I agree that we still have an enormous population living in temporary shelter, desperate to step up on the property ladder.
I also think that if the UK goes double dip a lot of the returnees will be escaping negative equity in property that they have bought in London. With prices crashing any nest eggs that people have saved will go towards mitigating outstanding bonds.
So lots of middle-class whiteys return to CT with no jobs and poor to no credit rating having lived overseas for 5 years? I don't see banks issuing them bonds.
With free healthcare and education in the UK, what really are they returning to here?
The lily white saffers in the UK would rather bite their tails off than return to SA. Not gonna happen. Ever. They will become "travellers" if they have to and live in a Jurgens rather than return to the country they consistantly badmouth to any drunkard Brit that will listen to the sad sad story of a coward.
The last few comments here reflect an unmeasurable factor - confidence in the future of SA. Morbid theorizing about the future has been the number on pastime of white South Africa since, well, 1652, and frankly it has now proved itself irrelevant.
One reason this theorizing irritates me a lot is that middle-class white South Africa has never faced an economic crisis. It has never been dispossessed in a war (like European middle-classes 70 years ago), it has never faced mass unemployment (like the US middle class in 1930s). It was our farmers who were destroyed in the 1930s, the working class unemployed whites who became the "poor whites": the professionals in the middle have never known a day of real suffering. I know crime is scary and that political irrelevance is irksome, but the reality is that middle-class life in SA provides some of the best quality of life anywhere in the world.
If the UK goes into a double dip South Africans living there will face conditions far worse than any Afro-pessimistic fantasy they might face back home. In the UK they will be jobless, with little or no savings, in a physically hostile environment (vicious winters, and possibly increasing social unrest, even xenophobia), with no family support group. In SA they'll have Ma and Pa's house with the pool and the braai, a far greater chance of employment, and if nothing else they'll have a support structure of friends and family.
@ Anon bitterly suggests they'd rather bite off their tales than come back. I don't think that's true, but if you read my original post more carefully, you'll see I suggested that it would only take 10% of Saffers to return to create a major bubble.
Let's not let pessimism or political gloom cloud our financial vision.
"With free healthcare and education in the UK" ??!! I have just recently returned from the UK and find that medical aid + school fees is much cheaper in SA than the enormous tax burden that the UK impose on it's working class. Sure its free if you are not working, but most Saffers in the UK are not eligible for state benefits unless they are employed.
Posted a response earlier but it's gone. In a nutshell I said that it's not wise to let Afro-pessimism cloud your financial judgment. Yes, many South Africans in the UK have convinced themselves that SA is hell on earth, but I still don't think it's a stretch to imagine 10% of them returning to SA. And that 10% has the potential to upset all kinds of property (or rental) apple-carts.
@Bean Counter
Interesting theory and almost worth a wager. But, 60,000 SAFFAS leaving the UK means either (i) they don't sell there and have no or little equity to buy here, or (ii) the market gets flooded and they don't get very much for their UK boxes anyway which is very possible with clear unemployment rising in the UK anyway. So to start with I don't believe those fleeing back to SA as 'financially pressured' having lost jobs will exactly be spending on housing on arrival. Secondly, they will be having to find employment in this bizarre place where highly skilled people can sit for months with open positions where they cannot be hired becasue they are a little too pale whittling away the savings they have.
@ Anon, I would wager that almost none of my postulated 60,000 returnees own property in the UK. So remove equity from the equation. As for joblessness, yes, but I really believe most would rather be jobless here (near Mom and Dad, friends, a social safety net) than in the UK. So even if they are all broke, they'll still need somewhere to live: suddenly huge competition for limited rental properties, BTL becomes a good option again, and once again we're back at mini-boom.
@Bean Counter. Yep - I'd guess you are correct. Personally having lived in the UK for 9 years and having a family (returned to SA 3 years ago), I would rather be in the UK in a recession than in SA ... but ... I guess that depedns on your family etc.
With comments like "I would rather be in the UK in a recession than in SA". It proves that nobody can predict what other people would do in certain situations...
@All
What you are forgetting is that many living and working in the UK have bought already if they have the intention of coming back. This is how they have been able to afford the prices and one of the reasons why they are there!
I'm one of those in the UK planning on going back to CPT towards the end of this year, so I'll comment
1. The job situation in CPT is rather ridiculous compared to the UK, even at a recent -0.5% growth. For someone in my field, software engineering, there are literally thousands of jobs, permanent and contract, in London. I recently looked on HomecomingRevolution, where there are 11 advertised, NATIONALLY. I.e. don't expect South Africans to be streaming back to CPT. JHB is a better option for many.
2. The pound/rand is now 11.43, whereas 3 years ago it was 15. That's a serious dent in savings to those coming back to SA.
3. There are a few who have bought properties in CPT over the last few years, mostly while prices were still rising. I.e. many who have plans to go back have already bought. Yes, it will probably be easier to afford large deposits from pound savings, but the repayments must come from somewhere and the dire job situation is not encouraging. And I for one would be very wary of putting my savings into property, when the future for property looks, how shall I put it, rather bleak.
4. There are some who own in the UK, but they are in the minority. And the market here is dead, so they can't sell. Or are in negative equity. I don't understand the comments that "a lot of the returnees will be escaping negative equity in property that they have bought in London". You cannot walk away from your debt.
5. Many who planned to go back have gone back already
My conclusion is that you should not expect a mini CPT bubble because of returnees. The majority of those who return, will return to where the jobs are, i.e. JHB. Most of the financiers, accountants and bankers will go to JHB.
@Benjamin
You are 100% correct in your analysis.
BC, I think it remains a crackpot theory, however some part of you has to be bullish considering your recent purchase no?
If it's crackpot it's crackpot. Am happy to concede if the majority think it doesn't hold any water. As for being bullish, I find these days it's easier to be objective - still want a crash to prove I was right all along, but now more able to separate the newsy from the noisy.
@Benjamin
I know of several people that walked away from 2 year visa stay in the UK having maxed credit cards to the tune of tens of thousands of pounds.
I know this is different, but hypothetically what would happen if one day you closed up your house, shipped your stuff to SA and just upped and left?
@ Benjamin
you also forgot to mention, that the cost of living in the uk is on a par or cheaper than Cape Town, if out side the center of london.
@JDog
I'm not really sure what would happen if you renege on your overseas debt, but maybe:
1. They might not let you in ever again, or arrest you on entry
2. You will never get a Schengen Visa again, or arrest you on entry
3. Other countries like the US might not let you in, or give you a visa.
So if you're content with hiding in the Africa, perhaps not much will happen...
@bbflames
I'm not sure if you're trying to say you agree or disagree with me...?
@benjamin
My point is that cost of living combined with a lack of jobs will make it even less attractive for those jobless Saffers to return to Cape Town. Their disposable income if they do return will be on a par or less than they had in the uk. Add to this, if they do get a job their salary will undoubtably be lower than what they will have been used to earning.
That said, anecdotal evidence suggests that many CA's have already returned. A friend who is a FD of a Cape Town based company said he would really struggle to find a new job as the competition from returnees with serious experience on their CV's are flooding the job market.
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