Observatory, the Cape Town suburb approximately 7 km from the city centre, has, says Craig Gilfillan, the Rawson Property Group’s franchisee for the area, become one of the very best examples in residential property of how a suburb can undergo a complete image transformation.
“Only 20 years ago,” says Gilfillan, “Observatory was seen as one of those areas to which people gravitated if they were on small salaries and unlikely to change their situations fast. This, of course, meant that the suburb was ideal for students and people such as artists living ‘alternative’ lifestyles.”
“Today,” he says, “although students still comprise 20% of the local residents, Observatory is seen by many as an ideal suburb not only for young upwardly mobile managers and professionals with young families but also by a small percentage of fairly affluent people who choose to live there because they appreciate how cosmopolitan the area is.”
“The general appeal of the suburb is, of course, greatly enhanced by many of the attractive Victorian and Edwardian homes which have been thoroughly renovated but which have retained their original character and attraction.”
Some 75% of Observatory’s homes, says Gilfillan, are freehold houses and 25% are sectional title. As yet the area has very few gated security villages.
Some idea of how steady and on-going the demand for Observatory homes has been can be gained from the fact that prices here in one year have risen between 15 and 20%. Today, therefore, says Gilfillan, the average price of a freehold home in Observatory is R1 million to R2 million (with a few exceptions achieving top prices of up to R3 million), while sectional title property is priced from R600,000 to R1,2 million.
A further indication of how demand has boosted prices here can be gained from two sales, both of which the Rawson Property Group was involved with at some stage. One home that sold originally for R800,000 was resold 24 months later for R1,3 million, while another which sold at R1,235,000 was resold a year later for R1,750,000.
The freehold homes in Observatory, says Gilfillan, have seen the greatest increases in value and this can be attributed, at least partially, to the fact that many have been subdivided to provide shared facility accommodation, the main clientele again being students.
“Arrangements of this kind,” says Gilfillan, “can be very profitable because in the better homes it is possible to charge as much R4,000 per month for a single room, even if the facilities have to be shared.”
Gilfillan foresees price rises continuing to rise but says the pace will slacken over the coming year. The Observatory market, he believes, will not be affected by these price rises.
“The real problem facing dedicated estate agents such as ourselves who are doing all they can to boost the area,” he said, “is that, as in all high demand areas, stock is now in short supply and very difficult to find. Those who own homes here see themselves as very well positioned to sit back and watch prices rise year-on-year.”
Here again, however, there is some good news: the banks, says Gilfillan, appear to be looking more kindly on loan applications – 95% of buyers have in the last year been successful in obtaining finance. What is more, whereas previously the upper limit for bonds in Observatory was, except in very special cases, around R2 million, today it is not unusual to find that bonds of R3 million are being approved – an indication that the banks, too, appreciate the growing value of Observatory property.
Rents in Observatory have also been rising — at ± 10% per annum, says Gilfillan, and the 100 plus rented properties that the Rawson Property Group manages here have become a core income generator. The range of rents available to people in the area, adds Gilfillan, is from R5,000 to R15,000. In the circumstances, it is not surprising to find that about 40% of Observatory’s property owners today are landlords renting out their properties.
In stock shortages of the kind described here, says Gilfillan, it is very difficult for him and his team to advise potential buyers. However in general, he says, if they are interested in purchasing in the area and they do get an opportunity to do so, it will almost certainly pay to accept what may now seem very high prices for predominantly old buildings because, although nothing can ever be guaranteed in the property world, a steady rise in values here does appear to be a realistic and fair assumption.