An apartment development on Cape Town’s Foreshore sold R220 million worth of units one week after launch in late March. That in itself is not news. What was noteworthy was the starting price of apartments: R1.26 million, completely unheard of in the City Bowl.
To achieve this price point, The Rockefeller offers apartments between 23 square meters (m2) and 44m2. The 23m2 units are sandwiched in next to a larger (35m2) corner unit on each floor, and it is almost certain the starting price was only for the smallest apartment on the first floor only.
While there’s no doubt that a price of around R1.3 million is affordable for the Cape Town CBD, what you’re getting for that price is venturing into the absurd. Some coverage has described these as ‘micro apartments’, but these make typical studio apartments in the north of Joburg seem palatial. The 23m2 apartment is a foot deeper than my (small) townhouse garage!
Out of the 25 units on each floor, all but four are studio apartments, i.e. they have no separate bedroom. In the case of the 23m2 and 25m2, there is not even space for a couch, making these not dissimilar to a hotel room. Quite how one would fit much more than a microwave and two-plate stove top in the ‘kitchen’ is a mystery.
One has to question the “affordability” label, given that the average price per square metre for most of the development is comfortably above R55 000!
According to a public price list, 174 of the 240 apartments had been sold as at April 4 (units on the uppermost floors will be operated as a hotel). The developers reported over 300 people in attendance at the Johannesburg launch event.
|5th floor||R1 337 500||R1 635 000||R2 343 500|
|6th floor||R1 362 500||R1 665 000||R2 386 500|
|7th floor||R1 388 750||R1 696 800||R2 432 080|
|8th floor||R1 414 500||R1 728 000||R2 476 800|
|9th floor||R1 440 000||R1 758 000||R2 519 800|
|10th floor||R1 465 000||R1 788 000||Sold|
* As at April 4
These smaller apartments are perfect for short-term (read: Airbnb) rentals. And there’s no surprise that there has been significant demand for units. This is a hotel in all-but-name, masquerading as affordable housing.
At an in-season rate approaching R1 000 per night, and with occupancy across a year averaging a not-demanding 65%, you’ll be more than covering your bond, levies and expenses. This is why there are mad scrambles for units as developments are launched in the city.
Now, it would be unfair – and unreasonable – to point to a single development only as evidence (or the cause) of rampant residential property price inflation across the Cape Town metro. The failure of urban planning (there’s been a vacuum for decades, evident across all cities in the country), is exacerbated in Cape Town because of geography: there are mountains and ocean in the ‘way’. In other cities, the ‘solution’ has been never-ending sprawl.
And, the house price situation in Cape Town (or the CBD) is not the developer’s fault either. Or, indeed, the fault of all property developers who’ve been adding residential blocks at break-neck speed. Basic economics teaches us about demand and supply. Ryan Joffe, one of the developers, is right when he says the market is “over-subscribed and under-supplied”.
Take a walk from Gardens to the Foreshore, and then towards Green Point. There are residential developments under construction everywhere.
Residents have been all but priced out of the City Bowl and the ‘gentrification’ of areas like Woodstock and Salt River are extending the problem eastwards too. But, as much as we think of this issue being unique to the Cape (or some other South African cities), it simply isn’t. The Bay Area in the US is an extreme example. As much as the City of Cape Town is trying to play catch up with a big shift in housing policy, this is decades overdue. But, that’s something for another day entirely….
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