The Cape Town CBD’s residential property market is showing strong signs of growth with demand having risen by almost 100 percent during the first quarter of 2014 compared to the same period last year.
This one bedroom apartment in Cape Town City Centre has a pool deck and air conditioning. It is selling for R1.675 million - click here to view.
This is according to Stefan Hauptfleisch of Cape Property Price Trends, who says during that time 67 units were sold to the value of almost R120 million compared to the first quarter of 2013 when a total of 46 units were sold to the value of R60 million.
At the same time foreign interest in the CBD has probably been at highest point since 2007. Jayson Sprawson, a Property Consultant with Lew Geffen Sotheby’s International Realty, says in the past six months he sold to many foreign buyers including two units for over the asking price over the telephone.
One of the central city’s main attractions is the diverse range of properties and prices, which can be as low as R15 000 per square metre, or up to R30 000 depending on the quality and position of the building. According to the Central City Improvement District’s State of Cape Town Central City 2013 report, the average price per square metre in the area last year was R17 500, he says.
Sprawson describes the buyers of properties in the CBD as “quite an interesting mix,” explaining that as well as a few foreign buyers, there is an equal mix of locals buying property as an investment and those who are buying to occupy. He says short-term letting by owners is becoming increasingly popular with investor owners due to the exceptionally high return on investment.
Hauptfleisch says the popularity of living in apartments in the city centre can be seen in recent sales figures for the CBD area as a whole. Since 2010 apartment sales, in terms of rand value, improved by 63 percent from R151.5 million to almost R248 million and 51 percent in terms of units sold from 115 units to 174 units until end 2013.
“Buying an apartment for investment purposes, the average value improved by 21 percent from R1.425 million during 2010, to R1.730 million during the first quarter of 2014.”
As an example, he says, during the first quarter of 2014 the average rand per square metre prices for a bachelor apartments (47 square metres) was R17 626 , a one bedroom unit (65 square metres)R18 000. A two bedroom apartment (105 square metres) was R17 310 and a three bedroom unit (206 square metres) was R16 890.
Lew Geffen, Chairman of Lew Geffen Sotheby’s International Realty says the high purchase rate they’re experiencing at the moment is entirely driven by the growing desirability of the area as a residential zone, because many people want to live within walking distance of work, and also like the idea of 24-hour city life on their doorsteps.
“As an investment zone the time to get in is now, because in two years’ time it’s unlikely there’ll be residential property going for less than R20 000 a square metre.”
Sprawson agrees that the year-on-year value gains shown this year will continue. He says there are few properties now selling for less than 95 percent of the asking price, which shows good appetite in the market.
Lew Geffen Sotheby’s International Realty currently has more than 15 homes for sale in the Cape Town CBD ranging in price from R1.195 million to R14 million.
“This demand is now driving prices up and there’s been a considerable bounce in the market from just a year ago. In fact, now there’s an undersupply as opposed to a year ago when there was an oversupply of residential property in the CBD,” says Sprawson.
Seven years ago, just before the global recession hit, many properties in the CBD were over-valued but “now that the CBD is on the up, the limited opportunities for developments means prices can only keep climbing.”
“Whereas buyers in the past saw areas of the Atlantic Seaboard as the only destination for their property investment in the R10 million or less band, they are now finding just as much value in the CBD where the values can be said to be at an absolute par.”
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