The shortage of residential properties in Cape Town, which has led to a spectacular rise in house prices, is prompting property developers to launch a number of new apartment units.
After seven years of muted development activity in Cape Town, property developers are back in business and delivering apartment developments in the city at pace.
Estate agents are reporting an increased level of apartment developments in the CBD and the swanky Atlantic Seaboard, which will see the delivery of more than 3 000 units this year. Apartment units are tipped to fetch between R30 000 to R40 000 per square metre in the City Bowl, translating to prices between R2 million and R6 million.
Ian Slot, MD of Seeff Atlantic Seaboard, said the City Bowl is becoming a popular place to live for its proximity to workplaces and its 24/7 vibrant nature. “There is Table Mountain and sea in the city, meaning there’s limited space to build apartments and this is driving property prices,” he said.
The shortages are compounded by the on-going “semigration” trend of property buyers from Johannesburg and Durban relocating to Cape Town. The perception that the Mother City is the best-run metro in terms of service delivery, offers a live/work/play offering, and has good government-run schools is a draw card for many.
Slot said property developers are also bringing luxury apartment units in the Atlantic Seaboard suburbs including Bantry Bay, Fresnaye, Clifton and Mouille Point, which are priced at R70 000 to R140 000 per square metre.
The unprecedented number of apartment units to be delivered has laid bare the value of property investments in Cape Town. According to the State of Cape Town Central City Report 2016, which is compiled by Cape Town Central City Improvement District, property developments worth R12 billion have been completed recently, are currently under construction or have been proposed in the CBD.
The report states that the city saw 228 residential units sold in 2016 compared with 185 in 2015 as 169 more residential units were introduced to the market. The average sales price for apartments (at an average square metre of 71) increased to R2.33 million in 2016 from R2 million in 2015. This means that the average price per square metre in 2016 was R34 000. See prices below.
Source: Cape Town Central City Report 2016
Mike Greeff, CEO of Greeff Christie’s International Real Estate, said that high prices in the City Bowl and Atlantic Seaboard are moving buyers in the direction of the less expensive Southern Suburbs including Claremont, Constantia and Noordhoek.
And property developers are catering to the growing demand. Greeff Christie’s is marketing on-going sectional title property developments in the southern suburbs that are worth more than of R1 billion.
Kevin Jacobs, a broker at RE/MAX Premier in Claremont, supported Greeff’s view saying “the next development phase might be in the Southern Peninsula as buyers get more value for money, in terms of property sizes”.
Jacobs added that property developers are purchasing freestanding units at R3 million to build two- to three-bedroom sectional titles units that are priced between R2 million and R4 million.
Western Cape prices have continued to buck SA’s residential property malaise. Figures from FNB show that Western Cape property prices have cumulatively grown on average by 75.8% between 2010 up until the first quarter of 2017 compared with Gauteng and KwaZulu-Natal, which grew by 40.1% and 44.5% respectively in the same period.
In fact, so price growth has been so rapid in the Western Cape that it has emerged as the most expensive region to purchase a property. Buyers in the province are having to shell out R239 568 more on average for a similar sized property than in Gauteng and R268 230 than in KwaZulu-Natal (see average house prices below).
Although this is good news for existing homeowners in the Western Cape who have made money from their properties, Pam Golding CEO Andrew Golding said new/first-time homebuyers are increasingly being priced out of the market. “Property deals are proving to be more challenging because of the increasing price gap in buying and selling and the difficulty in closing that gap.”
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