Having a strong, well-run metro is a great benefit to the property market. That’s a view from the property industry locally, and property developers and estate agents are seeing demand for properties in Cape Town exceeding the situation elsewhere in the country.
David Cohen, MD of Signatura, points out that, “Cape Town is the best and most functional metro in South Africa. This plays a crucial role in property values as no one wants to live in a place that cannot provide basic services to its residents.” Similarly, Ross Levin, licensee for Seeff Atlantic Seaboard, City Bowl and V&A Waterfront, comments: “Good service delivery and well-managed infrastructure underscore the strong property market here and the potential for significant capital appreciation.”
Other factors driving the high demand for property in Cape Town include semigration from other parts of South Africa (such as Gauteng and KwaZulu-Natal), and the new world of work, in which people can work remotely from any location. Since Cape Town offers a very attractive lifestyle, many foreigners are choosing to work remotely (and live) here.
“In fact,” says Ross, “Cape Town’s residential property prices surged by 30% over the last five years, significantly higher than Johannesburg’s 8.6% growth. And the figures for last year alone reflect a decline in values in Johannesburg, while Cape Town’s values rose yet again.”
The Atlantic Seaboard and City Bowl, in particular, continue on an upward trend in terms of property values. “Our developments attract a diverse range of buyers,” says Jacques Van Emden, MD of Blok, adding that, “Buyers are both homeowners and investors, and this reflects that Sea Point is a sought-after destination which provides consistent long-term capital gains.” The area has also proved popular with out-of-town buyers, resulting in the fact that “more Gauteng/Joburg buyers bought property priced at over R20 million on the Atlantic Seaboard than in their own city,” Ross explains.
Densification and modernisation
A clearly visible trend in these areas is the construction of new apartment buildings. At any time, one can see many new sites being developed in these suburbs, with Sea Point dominating the picture. This trend is driven by the popularity of the area, as well as by the limited availability and high cost of land. David points out that, “Market forces and year-on-year inflation keep Sea Point out of reach for many people. The only way to make the suburb more accessible is to densify.”
While densification may be seen as a negative force, “it must be carefully balanced with the character of the suburb,” explains David. Countering the potential negative impact of densification, Signatura has a strong focus on the architecture of its new buildings. “We have tried to step away from the ‘grey boxes’ that many developers build, and rather to push the boundaries as much as possible. In line with retaining the character of the suburb, our latest project, Tropicana, calls back to the established art deco identity already characteristic of Sea Point.”
Similarly, Blok sees architecture as a crucial element to allow for a balance between high-density living and the aesthetic and lifestyle appeal. “In addition to the visual issues, we are creating buildings that encourage a more walkable neighbourhood – that’s something we put purposeful focus on,” Jacques explains.
Another favourable impact of densification in these popular areas is that modernisation of the suburb takes place, so meeting the needs of buyers and tenants, especially younger ones, as well as creating a more attractive environment for holiday-makers. The tourist market is a significant factor for the local property scene, since, explains Ross, “tourism contributes to high demand for residential and short-term rentals, making it an attractive investment destination.”
Global trends
Demand among buyers reflects the global trend in terms of which younger people are looking for housing that requires minimum effort, while the older generation wants to downscale, giving up freestanding homes for more compact living. The development of new types of properties reflects this trend.
This is core to what Blok offers. Their developments offer micro, studio, one-bedroom, two-bedroom, three-bedroom and penthouse apartments, so providing for both established residents, younger professionals, and international buyers.
Investment opportunities
While the Covid pandemic caused turmoil in the rental market in Cape Town, we are now seeing a reversal of that impact. Not only have things recovered but Signatura notes that long- and short-term rental yields are above the levels seen before Covid. This trend is also reflected in the low vacancy rates – the lowest in South Africa, at just 1.51% – which means that the buy-to-let market is very lucrative. “And, aside from the good returns on an investment, capital value appreciation continues in Cape Town, outperforming the rest of the country,” explains Ross.
As regards investment opportunities, the Atlantic Seaboard remains a good option, but it is difficult for entry-level investors to get in. However, there are other options: investors and first-time buyers should consider suburbs a bit further away from the city centre, such as Observatory and Mowbray, suggests David, commenting that Signatura is developing a residential property called Riverlands near Amazon’s new African headquarters in Observatory. Since Amazon employs a sizeable staff contingent, there is likely to be a constant demand for the properties. Seeff also recommends that first-time buyers consider the CBD where it’s possible to find an apartment priced below R1.5 million.
All in all, Cape Town remains a destination of choice for a range of property owners and renters. And there is every reason to expect the popularity to last for many years to come.
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