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Convenient city living lures buyers to Cape Town CBD

09 Dec 2015

The steadily growing demand for residential accommodation in Cape Town’s central city shows no signs of abating after a record year in 2014 when around 530 apartments were sold to the value of R856 million.

This two bedroom apartment in Cape Town City Centre, offers open-plan living areas. It is selling for R4.99 million - click here to view.

This is according to Lew Geffen Sotheby’s International Realty Atlantic Seaboard CEO, Brendan Miller, who says the CBD apartment market last peaked during 2007 with 463 sales to the value of R730 million.

Miller says between January 2014 and June 2015, 682 sales took place to the total value of R1.093 billion.

“This equates to an average apartment price of R1.6 million at an affordable R20 160 per square metre, and when one considers all the amenities that come with city living, it’s reasonable when compared with Atlantic Seaboard apartments that easily sell at around R45 000 per square metre,” he says.

“We expect the average price per square metre in the CBD to increase quite dramatically towards the end of next year when several new developments in planning get to the transfer phase, though, so anyone considering an investment would be wise to move quickly before prices move into the realm of around R35 000 per square metre.”

Citing Deeds Office figures, Miller says a price band analysis of January 2014 to June 2015 shows that properties under R2.5 million have been most in demand, with around 570 sales realised to a combined value of R680 million.

“At mid-market level, almost 100 properties priced between R2.5 million and R5 million sold to the value of R313 million, and at the upper end of the market 13 sales in the R5 million to R10 million price band changed hands, with one property at 15 on Orange selling for R13.13 million.”

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, says between 2008 and 2014, the growth in terms of rand values and sales volumes in the area was 174% and 131% respectively.

This apartment in Cape Town City Centre has two bedrooms and an open-plan kitchen and lounge. It is on the market for R3.99 million - click here to view.

“During 2008 the total rand value was R313 million, but by 2014 the total rand value had shot up to R856 million. Sales volumes over the same period of time went up from 230 to 531, while the average apartment price went up by 19% from R1.36 million to R1.612 million.”

Miller says the exponential growth in the CBD residential market has been spurred on by several key factors. Investor confidence in the growth trajectory of Cape Town’s CBD has inspired a major renewal of the city centre, as well as new commercial and residential development. Also, he says many commuters are simply no longer prepared to waste time in traffic, even if this means cutting back on living space and sacrificing ‘luxuries’ such as gardens.

According to the Cape Town Central City Improvement District’s State of the Central City Report 2014, the overall nominal value of all property in the CBD in the 2007/2008 financial year was R5.641 billion. In the 2014/2015 financial year, the value had more than quadrupled to R23.724 billion.

Miller says this shows just how confident investors are in the future of Cape Town’s CBD, both as a commercial and as a residential centre. He estimates that the residential population has grown to more than 6 000 inhabitants.

Geffen says the development in recent years has also had an excellent influence on return on investment (ROI) in the residential market in the CBD.

“The average nominal percentage ROI over four years as measured in 2015 is a solid 19%, with buildings such as The Adderley realising 21% over five years, Mutual Heights 23% over four years, Mandela Rhodes Place 17% over seven years and Cartwright’s Corner reflecting 13% over four years.

According to the Cape Town Central City Improvement District’s State of the Central City Report 2014, the overall nominal value of all property in the CBD in the 2007/2008 financial year was R5.641 billion. In the 2014/2015 financial year, the value had more than quadrupled to R23.724 billion.

“This certainly bodes well for investors looking at entering the CBD residential market as there are still many upgrades and developments in the pipeline which will increase the demand for accommodation, as well as push up the value.”

The Cape Town International Convention Centre is due to double in size and construction of the new Christiaan Barnard Memorial Hospital is well underway. Premium office space in Cape Town’s newest skyscraper, Portside, is also being taken up at a steady rate.

Two major residential projects in the CBD have been announced so far this year as well, which will add more than 200 units to the available residential market.

Geffen says certain sectional title developments were popular with investors between January 2014 and June 2015.

“Mandela Rhodes Place took the lead with 60 sales to the value of almost R120 million at an average of R22 000 per square metre. Senator Park, The Adderley, Perspectives and the Icon Building are also sought after, all realising more than 40 sales per apartment block with prices per square metre ranging between R15 000 and R30 000.”

Miller says more and more Capetonians are beginning to follow the global trend of trading in their suburban homes for the convenience of city living, and they are seeing that correctly priced apartments are, almost without exception, snapped up within four to six weeks of being listed.
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