Over the past few years, as Cape Town experienced an unprecedented rise in residential property values throughout the metropole, the Cape Town city centre was understandably seen to be a strong investors market, with new developments quickly selling off-plan at record prices.
Sold at averages of around R19 229 per square metre in 2014, prices during 2017 topped out at R41 287 per square metre. However, the latest edition of The State of Cape Town Central City Report - 2018: A year in review has revealed a drop back down to an average of R35 431 per square metre - similar to levels last seen in 2016.
This, according to Rob Kane, chairperson of the Cape Town Central City Improvement District (CCID), the organisation that publishes the report, is very good news for the CBD and surrounds.
“In 2017, the median apartment price sold in the city centre was around R2 million. This saw a small increase to R2.1 million in 2018, showing a slowdown on the previous trend of high and quick year-on-year property price increases,” says Kane.
“In other words, just like the rest of Cape Town, the residential market in our CBD has adjusted to prevailing economic conditions.”
Kane explains that prices have run ahead of economic realities in recent years.
“Affordability has shifted market conditions from a seller’s to a buyer’s market, in which buyers are willing to wait for value to return to the market while sellers are no longer dictating prices,” he says.
“We’re also seeing fewer people ‘semigrating’ to Cape Town from across South Africa. This has resulted in a softening in demand for properties in Cape Town, including in the CBD.”
According to Lightstone, while the largest cohort (42%) of buyers in the vicinity of the CBD during 2018 were considered to be middle-aged (between 36 and 49 years), just under a third were typically first-time buyers under the age of 35 years.
Kane says this suggests that professionals are now finding value in the city centre, and that the latest wave of development has acknowledged this demand and the right type of product is being released for the current market to absorb.
The right kind of product, according to the report, is apartments that buy into the micro-living trend - an international concept already popular for years in vibrant downtown areas abroad - that sees apartments being developed between 20sqm and 40sqm in size.
Buildings such as these are ideal for downtown living, bringing people close to where they work at prices they can afford. With the living spaces themselves being compact in size, the building design is then also maximised to encourage interaction between residents in communal spaces.
Many buildings of this nature will also incorporate co-working spaces, another hot trend in downtown areas today.
Another trend that is emerging is that some developers are now holding on to these buildings, preferring to rent out apartments rather than selling them as sectional title, thereby retaining an interest in the building. A number of developments in the CBD are already following this trend, including 106 Adderley, where rentals start from R15 500 per month.
There is no doubt that anyone who has invested money in the residential property market in the Cape Town city centre over the last decade has seen phenomenal returns, says Kane.
In support of this, the report noted that the median price of an apartment sold in the CCID area has seen an increase of 97.6% in the last five years alone.
