Cape property now the hottest residential investment in the country
Category Market Update
Based on the recent StatsSA House Price Index, property prices in Cape Town grew at pace twice as fast compared to anywhere else in the country in the period since 2010. Properties now sell for about 141% on average more than in 2010 compared to Johannesburg where property owners only achieved 71% growth, despite this being the wealth capital in the country.
We have seen that during the boom years the growth has been well upwards of 10% to 20% in some areas, but growth also slows notably when demand in the market declines for various reasons. These are not always economic; for example when the water crisis hit the city in 2015-2016, there was a notable decline in the market.
A recent Lightstone assessment also pointed out that Cape Town has been the most stable real estate market in the country. This pertains not only to the residential sector, but also many parts of the commercial property sector. The latter is in part driven by an influx of businesses into the city.
The market continues to be supported by a number of factors beyond just residential demand. For example, tourism and semigration for better service delivery and quality of life are key factors driving the added demand experienced in the market.
According to a Wealth Report, Cape Town ranks as the most desired city in South Africa for luxury buyers and currently sits in the top 20 globally in terms of value growth over the last few years. This is especially meaningful for international buyers who have also returned in their numbers following the pandemic challenges.
While the Cape Town property market is more resilient, it is not immune to the economic challenges, and we are also seeing a cooling off period setting in. With that, property price growth inevitably comes under pressure as we can see in the market now, especially at the higher price bands above R3 million.
Propstats data for example shows that the average price discount across the Southern Suburbs on seller's asking prices this year is around 8.6% compared to 7.9% in 2022. Buyers now have more power in the market which in turn means that sellers need to adjust their price expectations.
The strength of the Cape Town property market nonetheless still provides ample insulation against a potential price collapse. So while we are seeing lower growth, it is unlikely that we will see wholesale price drops.
For property buyers, the strength of the Cape Town market should be ample incentive to invest while they still can, especially given that price growth has again slowed, especially in the upper price bands. The market is offering good value for money for those who expect an inevitable upswing in future and are willing to buy now.
Home is our Story and property our passion. The upside of being a seller in Cape Town is that you are two to three times more likely to find a buyer compared to other metropolitan areas. We continue seeing strong interest in the property market with ready buyers, but sellers do need to be mindful that the market has shifted more in favour of buyers.
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Author: Gina Meintjes
