Over the past decade, hundreds of thousands of South Africans have emigrated in the hopes of starting a new life for themselves and their families. Some have opted for the relatively familiar lifestyle and climate of Australia, while others have braved the high costs of the UK and the freezing winters of Canada. 

If purchasing property is a weighty, life-altering decision to make, purchasing property in a foreign country can only be more daunting. Making the right decision requires an understanding of all the elements, including the standard and cost of living, job market, economy, housing market and buying conditions, among other factors. MortgageSA provides a snapshot of what emigrants to these three countries can expect in terms of purchasing a house.

Sydney: 
$345 000 (R1 581 8071) to 
$430 000 (R1 971 528)

Melbourne: 
$270 000 (R1 237 936) to 
$300 000 (R1 375 485)

Perth: 
$196 000 (R898 650) to 
$219 000 (R1 004 104)s

Adelaide: 
$165 000 (R756 516) to 
$180 000 (R825 291)

Much like South Africa, Australia has experienced a house price boom. But, unlike South Africa, the housing market has weakened considerably this year, with house price growth falling to 10% from 17% earlier in the year. House price growth in Sydney has fallen by an average of 8%, and in Melbourne by an average of 15%, and further decreases are expected.

Australian cities fared well in the annual Mercer HR Global Quality-of-Life survey, most notably Sydney, which ranks in the Top 10 global list of cities in terms of high quality of life. However, the strengthening of the Australian dollar has seen the cost of living in Australian cities rising dramatically, with Sydney placed 20th on the list of the 144 most expensive cities to live in, Melbourne in 67th position and Brisbane in at 87 in a separate cost-of-living survey, also conducted by MercerHR.com. 

The cost-of-living survey measures the comparative cost of over 200 items including housing, food, clothing and household goods, together with transport and entertainment. The Australian mortgage industry is well-developed and competitive, and ­offers mortgage products to suit all types of buyers, from first-timers who require 100% financing, to specific products for investment buyers. Interest rates are reasonably stable, with the prime rate at just over 7%.

Many houses in Australia are sold via auctions, a method that is not as widely used in South Africa. While this method could be of benefit for sellers, the ­obvious disadvantage to buyers is that auctions could drive the price up and out of a buyer’s reach. Typically, a 10% cash deposit is required to secure a sale.

Because of this high rental cost, and the relatively low interest rate (current base rate is 4,5%) in the past five years it has been feasible for many South African’s to purchase property. However, the UK’s house price boom, which has seen house prices increasing by about 19% in the first six months of 2004 alone, has put property out of the reach of many. The average house in London now costs almost £195 000 (R 2 306 8872), with the average in the rest of the country at £151 524 (R1 792 557) – more than double the price in 2000.

Indicators point towards a slow-down in the growth of property prices. Nationwide Building Society and Halifax have both reported a drop in price growth – the first fall for two years, and the sharpest fall since December 2000, and South African’s wishing to enter the UK property market would do well to wait.

Canada
Three quarters of all new immigrants settle in one of Canada’s largest cities – Toronto, Vancouver or Montreal. Though Canadian cities were historically ­relatively inexpensive, they have moved up in the rankings of most expensive cities in Mercer’s cost-of-living study, due to the strengthening of the Canadian dollar. Toronto is in 89th position and has become more expensive than a number of US cities. In spite of this, a number of Canadian cities were featured in the top 20 cities in the Mercer Global Quality-of-Living Survey, ­including Ottawa, Montreal, Toronto and ­Vancouver.
House prices in Canada have been riding the same global price boom wave, with prices rising by about 7,3% in 2004 (YTD). ­Average house prices vary widely between ­cities:

• Vancouver  $342 761 (R1 751 0613),
• Toronto  $284 955 (R1 455 748),
• Ottawa  $221 249 (R1 130 293), 
• Montreal $175 670 (R897 444).

The current basic interest rate is around 3,72%, and interest rates have remained relatively ­stable. The mortgage industry is well ­developed and competitive, but 100% mortgages are not available and 5% of the purchase price is the minimum down payment that will be accepted. 

A view on South Africa

While it is certainly true that many South African’s have chosen to leave the ­country, very many more have chosen to stay and, an increasing number of South African’s are heading back to our shores.

A recent web-based poll indicated that many expats cite their friends and family as the reason they want to return. South Africa is at a very exciting stage of development and there is a great amount of confidence in South Africa, not just from South Africans but also from the international community, and this is helping to incite a passion for South Africans living abroad to return home. There has also been a marked slowdown in the number of people emigrating – the US embassy is down 25% on the number of resident applications for the first six months of this year.

MercerHR.com has consistently ranked Johannesburg as one of the cheapest cities in the world for a number of years with property, food and entertainment being key to the sound value offered. 

From a property perspective, South Africa is still a very good place to ­invest. 

The latest ABSA House Price Index has ­reported very strong growth, and the positive indicators are still in motion. In fact, the outlook for property is very good indeed.

A number of positive factors have contributed to the strong market. According to the ABSA House Price Index these could include personal tax relief; lower transfer duties on property; strong growth in the real disposable income of households; the improved investment status of property compared with that of other asset classes; relatively low inflation and interest rates; strong domestic demand for housing as a result of an increasing number of households and a rapidly growing middle class amongst previously disadvantaged communities; and continuing foreign demand.

The average house prices in the major centres are as follows:

• Cape Town   R699 275
• Johannesburg R635 123
• Pretoria   R676 984
• Bloemfontein  R494 449
• Durban   R639 707
• Port Elizabeth R564 008

Furthermore, obtaining finance for the average property has become easier in South Africa – with banks offering 100% bonds and even loans with cost in certain circumstances. 

Consumers have been the biggest beneficiaries since the advent of the mortgage origination industry in South Africa, as competition between banks on home loan rates has increased dramati­cally. Banks have been forced to focus on their product development, pricing and service to remain competitive.

Any South African’s thinking about emigrating should take into account the number of foreigners that view South Africa as a prime ­destination. 

Given the distance and travel time to South Africa, the foreigners and expats investing in South African property must be basing their purchase decision on lifestyle. Foreign ­buyers invest primarily as a result of lifestyle, and by lifestyle we mean ­climate, type and size of ­property and the cost of living. But equally ­important is the interest rate ­environment, stability of ­exchange rates and consistent growth in property ­values. These are draw cards to foreign investors, and they should also be seen as such by South ­Africans.