Cape property values climb ever higher as demand outweighs supply

The Cape property market continues to define and set the bar ever higher according to Seeff chairman, Samuel Seeff.

Consider for example that for the second consecutive year, the Cape metropolitan property market exceeded that of Johannesburg in number of transactions and value as demand exceeds supply.

With around 11 487 property transactions worth about R20 billion, it generated over 40 percent more than the Joburg metro’s just under R13.7bn for 11 307 transactions.

Average prices in the Cape also continue appreciating at an inflation beating pace. According to the latest FNB Western Cape House Price Index, Cape property appreciated at around 14.9 percent on average, well above last year’s national average of 6 to 8 percent.

The average price of sectional title property is now at around R1.5 million, significantly more than the R800 000 for the Joburg metro. Freehold property now sells for around R1.8m on average, about 20 percent more than Johannesburg’s R1.5m.

Seeff says that the strong demand is attributable to a number of factors. Bank lending is on the rise and so too is buy-to-let investment which, according to the index cited above, now accounts for around 10 percent of all activity, up from 6 percent in 2012. At the same time, financial stress-related selling is down and financially strong sellers are once again upgrading, accounting for a further 19 percent of activity and driving demand for more expensive property.

In line with global trends that point to the wealthy gaining in wealth and investing more in property, trophy home sales across the city more than doubled year-on-year to about R1.506bn (about 51 sales) compared to 26 sales worth R762m in 2013. This includes about seven sales above R40m, the highest number ever and with prices ranging to R65m and R70m on the Atlantic seaboard and R69m in Bishopscourt.

A further boost to the market came from foreign buyers who invested about R2.1bn, about 30 percent more than in 2013, says Seeff. About R1.17bn of this came from the suburbs of the Atlantic seaboard and city bowl, almost R491m from the southern suburbs (including the Constantiaberg area), just over R231m from Hout Bay and the remainder mostly from the Blouberg and False Bay areas.

Activity was further boosted by upcountry buyers, mostly from the greater Johannesburg and Pretoria area who comprised as much as 15 to 20 percent in areas such as the Atlantic seaboard, southern suburbs, Hout Bay and Somerset West over the last year, says Seeff. This includes buyers moving to the city as well as those who invested in second homes for holiday purposes or the long-term objective of moving here permanently.

The rental market too is very active, says Seeff. From mid-market areas across the northern, western and south-eastern side of the city to the luxury areas of the southern suburbs where homes in Constantia and Bishopscourt now fetch rentals of R30 000 to R60 000 a month, there is no shortage of demand.

Apartments across the CBD, V&A Waterfront, Green Point through to Sea Point remain in demand with rentals now ranging from R10 000 to around R25 000. Luxury homes in Clifton, Bantry Bay, Fresnaye and Camps Bay now fetch from R30 000 to R80 000 a month on rentals of 12 months and longer.

“The Atlantic seaboard suburbs of Clifton, Bantry Bay, Fresnaye, Camps Bay and the V&A Waterfront make up the country’s richest real estate belt and, together with Constantia and Bishopscourt rank among the most valuable in the country with buyers prepared to pay from R20m to well over R100m for luxury homes here.

“Last year, WealthInsight (a London wealth consultancy) released data that pointed to the Cape as having almost 600 properties valued at more than R20m – almost twice as many as Johannesburg. It also ranked Cape Town in the top 20 second home buying destinations among global multi-millionaires.

“The efficient marketing of the city has, in the last year alone, resulted in it ranking among the most sought-after by Condé Nast Traveler, The Telegraph (UK), Wall Street Journal (USA), New York Times, Lonely Planet and CNN World who named it amongst the most loved cities.

“Aside from good governance, service delivery and a strong economy, Cape Town delivers on three key elements – location, lifestyle and scarcity – that makes it a global high demand and valuable property hot spot,” says Seeff.

“The mountains, the sea, the best Blue Flag beaches and palm-fringed promenades on the continent, world heritage sites such as Robben Island and Table Mountain, the V&A Waterfront, floral kingdom and wineries, all right on our doorstep contribute to the demand for property. Add to this, the cosmopolitan lifestyle and urban shopping, dining and entertainment nodes, historic and cultural attractions and weekend foods and goods markets.

“On top of all of this, the city is still relatively safe. Progress too continues. Consider for example the development under way at Century City, De Waterkant, the foreshore and V&A Waterfront and the MyCiti bus network that continues expanding to facilitate greater access from outer-lying suburbs.

“There is something for everyone here, whether they want to spend R1m or R100m. We have now had two years of good growth in the Cape property market and 2015 looks set to be another good year, the economic challenges notwithstanding,” says Seeff.

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