While the last few years have seen South Africa’s housing market experience a sluggish time, Cape Town real estate, particularly in certain suburbs, has bucked this trend and managed to outperform the national average once again. Cape Town’s property market consistently displays remarkable resilience, with demand remaining robust.
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As a new year starts to get underway, Alexa Horne MD of DG Properties, looks at what the last few months of 2023 were like in the property sector, and what the first quarter of 2024 may bring.
According to Lightstone, total national property sales for the first three quarters of 2023 were down 20% from the same period last year.
Due mainly to economic challenges, rising inflation and interest rates, house prices in most major property markets have largely stagnated, or even fallen slightly in 2023, and nationally, we’re still in a buyer’s market. In most cases, this is because the number of properties (in those suburbs with available land) is steadily increasing as developers cater to increased demand. This also keeps prices down.
Cape Town luxury property bucks the trend
However, in Cape Town, we remain optimistic due to high demand. We continue to receive significant enquiries across all sectors of the market – despite a particularly cold and wet winter. We find that, regardless of how the overall market is performing, well-priced residences in desirable areas of the city continue to gain traction.
The luxury property market remains robust, largely unaffected by interest rate hikes and rising living costs. Ultra-wealthy buyers (those seeking properties exceeding R20 or R30 million) continue to show confidence in the market, realizing the investment potential of these luxury properties that offer long-term growth and investment potential, as well as great value when compared to high-end properties in other world-class cities.
Quality of life is a defining factor for foreign buyers who enjoy Cape Town’s scenic beauty, long summers, and endless attractions. Semigration is another driving force in the Western Cape market. The Western Cape has also initiated forward-thinking programmes to enhance infrastructure, communities, and industry - particularly green energy initiatives such as the Energy Resilience Programme that aims to address the energy crisis and reduce the impacts of load shedding on businesses and citizens in the Western Cape. If implemented successfully, such initiatives will further enhance the appeal for both local and foreign investment.
What Buyers Want
Horne says they have found the most demand is for properties on the Atlantic Seaboard (in neighbourhoods like Bakoven, Bantry Bay, Camps Bay, Clifton, Fresnaye, Green Point, and Mouille Point), in the City Bowl, and in the Southern Suburbs. The Southern Suburbs stand as one of the country's strongest real estate markets, witnessing exponential increases in house prices over the past decade (especially in areas like Bishopscourt, Newlands, Rondebosch, and Constantia). Their charm, convenience, accessibility to top schools, and stunning scenery continue to draw property purchasers from both near and far - who are increasingly looking for new, secure developments and estate living in particular.
Sectional title units are in demand, often because they come with more affordable price tags than freehold properties, and offer safe and convenient lock-up-and-go living. So too do micro-developments which, coupled with their attractive pricing, are usually centrally situated in prime locations near key employment and entertainment nodes in CBDs of major cities - often in areas where development space is highly limited. This adds to the appeal of these apartments. Mixed-use developments are also increasingly desirable to buyers due to their location and ease of access to other convenient lifestyle amenities within the building.
When it comes to fixtures and finishes, we are seeing high demand for sustainable energy features to combat load-shedding. For luxury home buyers, things like gas-powered cookers and fireplaces, generators and inverters, solar energy and heating, water storage, purification and recycling systems, and a borehole, are among the top items now sought. This is a trend that won’t be going anywhere anytime soon. The demand for sustainable solutions that make life easier, as well as eco-friendly options that address our pressing environmental issues, will become more important to buyers.
Buyers are also looking for properties that allow for multi-generational living – homes with separate living spaces that can accommodate elderly parents or other family members. These types of homes are also in demand from buyers who wish to harness an additional income stream by renting the space out for short-term lets.. This trend is particularly prominent in Cape Town.
A rigorous rentals market
The demand for Cape Town property does not end at sales. The rental market is booming!
We have seen the price bracket for luxury rentals rise, with properties to rent from R80,000 plus per month seeing far higher interest, as opposed to the previous R25,000 to R35,000. Mostly as a result of a rise in demand in desirable areas. In a stand-out instance, DG Rentals recently secured a rental of R290 000 per month for a home in Constantia.
The Southern Suburbs are experiencing a significant shortage in rental stock due to a substantial increase in demand, and most of the properties in our DG rental portfolio are rented out before we even list them publicly as we have a waiting list of clients looking for rentals.
What the near future holds
With the easing of the consumer price inflation rate in recent months hopefully indicating that the interest rate hiking cycle is at an end, the sentiment in South Africa’s housing market remains positive and we are expecting an improved year of sales in 2024.
"We have already experienced a surge in activity and trading, with foreign buyers being extremely active in the higher-value space on the Atlantic Seaboard and Southern Suburbs, and as the summer season progresses, we anticipate increased activity in the high-value space. Likewise, the demand from semigrators will not abate and all of this adds up to what promises to be another strong year for Cape Town real estate," says Horne.
READ: Here's what really great locations have in common, along with 6 tips for first-time homebuyers
An article published on Property24 on May 25, 2022, features Ana Roberts of Just Property Upper Highway, who explains that another great benefit of downscaling is that small spaces require less furniture - a few great statement pieces allow for simple, minimalist décor and a beautiful, welcoming home at a fraction of the cost of furnishing a big house. And the cleaning is a breeze!
Less clutter equals less stress, and isn’t that what we are all looking for now?
Tips for cosy-home hunting:
Location, location, location - You want to remain close to your family and friends, and have ease of access to stores and other amenities such as doctors, hospitals etc. Narrow your search to areas that tick these boxes.
What are your deal breakers? Does the home offer the main assets that are important to you, for example, a good kitchen, nice family space, shower etc?
Current wants vs future needs - If you are downsizing because the children have moved out and you are getting older, consider a single story with the ease of access rather than a property with stairs that may cause a problem later.
Growing pains - Will you be able to handle the upkeep of a big garden, or is it time for something smaller that is more manageable? Will your pets cope with a smaller space; is there somewhere nearby where you could walk them?
Fit for purpose - Will your favourite furniture fit in the new space? Make a list of every piece with which you can’t part. Take measurements. Then take a tape measure with you when you start narrowing down your list of potential new homes.
Storage war - Is there enough cupboard space in the bedrooms and the kitchen? Do you need outside storage too?
Peace of mind - Check the security features of each property you visit. Find out how safe the area is and what security is available. Ask the neighbours, chat to the local police, and phone a security company that focuses on the neighbourhood.
Guest appeal - Consider how many bedrooms you will need going forward - if your kids have all moved out of home, you may only need one spare room for when they or your friends come to stay.
Paper trails - Remember to ask for compliance certificates, even those that aren't required in your province (for example, gas installations and solar geysers should come with a compliance certificate - if something goes wrong and you don't have one, your insurers may refuse to replace the geyser, or cover damage caused by a gas issue).
Complex questions - If you are moving into a complex or an apartment, be aware that there may be the added expense of levies, clubhouse fees and/or security. Ask about historical escalation rates and request a copy of the body corporate rules (if applicable.)
Ask your neighbours if there are any noise issues, does sound travel through the walls and ceiling? How old is the plumbing, the lifts etc - upgrading such items is very expensive and you’ll have to contribute. What parking is available for guests?
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