With housing supply limited by geography and demand fuelled by the so-called semigration of Johannesburg buyers to the region, properties in Cape Town’s city centre are enjoying a price premium relative to the country’s other six major metro areas.
Indeed, despite the slowdown in the country’s housing market this year, house prices in the City of Cape Town continue to grow at more than 10% a year, compared to around 4,9% in other metros, according to the latest available statistics from property data company Lightstone.
Competition for housing is further intensified by the fact that the Cape metro is experiencing an influx of young people, which is not surprising as official estimates show that South African cities’ average incomes are some 40% higher than incomes in the country overall, while employment opportunities in metro areas increase at twice the national pace.
“The semigration trend is evident across the board and includes buyers of all ages,” say Adél and Charl Louw, who own the Chas Everitt International franchises for the Atlantic Seaboard, City Bowl and Northern Suburbs of Cape Town. However, as they point out, relocation from upcountry to the Cape comes at a significant price. “The replacement cost of a property in Cape Town when compared to Johannesburg is between 30% to 40% more. A decent apartment in the CBD and surrounds – one that includes a garage – will set you back at least R5m. This is simply not doable for many of relocating families, who usually find it more affordable to relocate to the southern or northern suburbs of Cape Town or to Stellenbosch, Paarl or Somerset West.”
So contrary to popular perception, Charl says, 80% to 90% of buyers in the CBD are in fact affluent locals. “Many of our Johannesburg clients choose to rather rent in the city, and are happier paying monthly rentals of R50,000 than the steep repayments on an R8m or R10m house. Quite a few rent in the city for a year or so and then drift out to the leafy suburbs where the houses and gardens are larger and the schools easier to access.”
Where, then, does this leave the Cape’s emerging generation of young professionals? “Most twenty-something professionals can only afford to live in the inner city if they flat-share,” says Adél, who adds that those determined to take that first step on the property ladder often buy in the more affordable northern suburbs of Parow, Durbanville and Bellville. “They then either commute or they let out these homes in order to use that income to pay their rents in the City Bowl,” she explains.
By and large, the high-value apartments in the CBD’s repurposed office blocks are off limits to young professionals who, instead, tend to gravitate towards suburbs like Sea Point, Vredehoek and Gardens where the rents are still relatively affordable – but only just. “Areas like Mouille Point have already become all but prohibitive,” notes Adél.
Of course, with the steady shift away from an office-based economy, the CBD may eventually lose its lustre altogether for young professionals. But, for the time being at least, the inner city remains highly aspirational. “These homes and apartments are constantly in high demand and don’t sit on the market for long,” says Charl. “In fact, the challenge is not to move stock but rather to have enough of it, and prices continue to climb strongly as a result.”
