Cape Town’s FDI strategy good news for property investors

Cape Town consistently places at the top of global tourist destination and travel awards, tourism has certainly fuelled the local economy and investment potential within the city over the years.

More recent initiatives, however, have been aimed at expanding the city’s reputation beyond the leisure industry, and the resulting boom in the business sector is proving to be great news for property investors.

“Cape Town has always been a ‘gateway to Africa’,” says Tony Clarke, Managing Director of the Rawson Property Group. “Not only for travellers, but also businesses looking for a base from which to tap into the vast potential of the growing economy here and further north. Until recently, these opportunities have been overshadowed by our massive tourism sector, but the city’s increasing commitment to boosting its profile as more than just a tourist destination has really started to pay off.”

Proof of the success of initiatives like Invest Cape Town can be found in fDi Intelligence’s prestigious Global Cities of the Future 2016/17 report, which ranks Cape Town amongst their top 25 cities for foreign direct investment strategy.

“Cape Town was the only African city to place in this category,” says Clarke, “which is a huge honour and a great show of confidence in our strategic direction – confidence that is being reflected in the property market as well.”

According to Clarke, foreign direct investment boosts the property market in a variety of ways.

“Firstly, businesses setting up headquarters in Cape Town require suitable commercial property from which to operate,” he says. “This stimulates demand for existing offices, warehousing and manufacturing premises, and also encourages new developments in the commercial space.”

The number of jobs created by these new businesses and developments inevitably attracts new employees to the area as well. Some of these may relocate permanently and some may stay on a more temporary basis.

“This drives residential property demand in sales, and long- and short-term rentals,” says Clarke, “which not only pushes sales prices upwards, it also encourages investment purchases as capital appreciation and buy-to-let opportunities soar.”

Appreciation has certainly continued unabated in Cape Town, despite the economic pressures that have seen many other South African cities’ property markets flounder.

“Cape Town’s inner city, in particular, has seen excellent and ongoing growth,” says Clarke, “and a big part of this may well be due to the success of our drive to bring more international companies to our shores.”

With Cape Town’s skyline a mass of cranes and scaffoldings as numerous new commercial and residential developments race for completion, it seems the city’s investment potential is far from the apex of its curve. Investors looking to get in on the action, however, may need to up their ante if they don’t act soon.

“Inner city average sales prices in Cape Town climbed to nearly R2.5million in 2016,” says Clarke. “By comparison, Johannesburg’s CBD sales averaged at R653 770, while similar areas in Durban and Pretoria didn’t even break the R500k mark.”

As for 2017’s prospects, Clarke believes Cape Town will continue to top the national leader-boards.

“We have definitely not seen the end of Cape Town’s rise as a powerhouse on the African economic front,” he says, “and growth in this space will inevitably see continued improvements in the property market as well. There may be bumps along the road, but that road is undoubtedly leading up, and investors are going to see great returns if they get on board for the climb.”

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