Using a two-quarter moving average, the estimated percentage of foreign buyers in the city of Cape Town was a lowly 3.5% of total buying for the quarter under review, and an average of 4.75% for the year as a whole.
This was significantly down from the estimated 10.75% average for 2008 and 7.75% in 2009.
"The absolute amount of foreign buyers may not have declined as much as the percentages suggest, because the market was thinner in 2008 than in 2010. But that magnitude of decline in percentage would suggest some sort of absolute decline in foreign buying in our region," the survey indicated.
Ironically, one reason for a decline of foreign buying may have been an overall increase in foreign investor interest in SA.
"By this we are referring to the well-documented recent surge in portfolio 'yield-seeking' investment by foreigners in South African bonds as well as equities, which in turn caused the rand to strengthen significantly against some of the world's major currencies," the data indicated.
Whereas in rand terms, the average house price in the Western Cape was estimated to have risen by 10.2% from the 2009 average, in US dollar terms the average increase was a far more extreme 25.3%, while in euro terms an even greater magnitude of 32.4%.
"At that sort of rate of price growth, it is hardly surprising that we see agents reporting a foreign buying drop-off. I would contend that the decline has little to do with any rise in negative sentiment towards our country or our region, but more to do with an affordability issue, driven by an increase in investor interest in other South African asset classes, resulting in stronger non-property investment inflows in 2010, and a stronger rand that drives house prices up dramatically in foreign currency terms," said Clinton Martle, Western Cape regional sales manager for FNB Home Loans.
One survey response showing improvement in 2010, however, was that relating to the portion of buyers by race, according to the apartheid-era classifications, namely white, black, coloured and Indian/Asian.
Agents claimed that buying by the so-called black population group had risen from 11% in 2009 to 25.5% in 2010.
While this number can be erratic, this represented a jump to the highest percentage of black buying since the start of this survey question in 2005.
"We had expected black buying to be an important source of support for the market in 2010, because this group's income bands below 500,000 rand per annum were believed to have lower levels of indebtedness than the other three race groups, thereby giving it room to grow its borrowing and home buying at a faster rate off a lower base.
"However, the additional relative support from this emerging group was not sufficient to halt the weakening of the Western Cape residential market in the second half of 2010, a trend that is very much in line with the rest of the country," Martle said.
After peaking at a year-on-year price inflation rate of 13.5% in the second quarter of 2010, the FNB Western Cape House Price Index started to show declining price growth to a rate of 7% in the fourth quarter of last year.
While not yet in price decline, this weakening in the rate of growth had much to do with a lack of further interest rate cutting in 2010.
The slowing price growth came despite the agents in the Western Cape Estate Agent Survey perceiving a mild uptick in demand levels after two previous quarters of decline.
However, while it was possible that the resumption of interest rate cuts by the SA Reserve Bank could play a supportive role for housing demand, "we believe that this improvement reported by agents is largely seasonal, driven by the arrival of the summer months".
Financial pressure on households remained significant, with the percentage of sellers selling in order to downscale due to financial pressure still hovering at about 15% of total selling.
In addition, agent survey responses pointed to a still-unrealistically priced market, with the average time of houses on the market still above 16 weeks and 84% of sellers still required to drop their asking prices.
