Areas and Places Research

Property investors to consider alternative options as house prices continue to rise in City Bowl and surrounds

According to recent statistics compiled by Lightstone, the average selling price of properties in the Cape Town City Bowl and surrounds, including Green Point, Sea Point and De Waterkant is between R3 million and R5 million, and properties in areas such as Bantry Bay, Fresnaye and Camps Bay averaging between R 8 million to R16 million.

According to David Rebe, CEO of Sandak-Lewin Property Trust, these exorbitant prices, which are likely to escalate further, are keeping many property investors from purchasing in the City Bowl and Atlantic Seaboard neighbourhoods. He says that viable alternatives do however exist for property investors wanting to live in these areas, even if price bracket is not with their budget.

“Properties in these areas are among the most sought-after in Cape Town, mostly because the areas are located close to the City Bowl, public transport, as well as amenities such as the beach, and a wide array of restaurants, cafés and bars.”

“Over the years, house prices in these areas have increased significantly, so much so that it is no longer a feasible investment to purchase property in the area. However, a viable alternative for property investors is to purchase property in up and coming suburbs outside the City such as Century City, where bond repayments aren’t as high and property offers high yields, and to continue to rent in the City Bowl and surrounds for lifestyle reasons. Rentals in these areas are also in high demand, so investors are able to let out the property for a reasonable price.”

According to Rebe many Capetonians choose to live in the City Bowl and surrounding areas due to various lifestyle choices such as close proximity to work and limited traffic. “Renting in the City Bowl and purchasing property in a more affordable suburb and surrounds allows one to live in the desired location while still making an investment in real estate in an area that has high rental returns.

“For example, Woodstock and suburbs such as Century City have higher rental yields compared with the Atlantic seaboard, due to the lower cost base of the properties coupled with high demand for rentals in the area. A three bedroom house in Century City which is priced at about R2 million will yield a rental return of approximately R20 000.00 per month or R240 000.00 per year, and the annual bond payment of R225 000.00 over 20 years, generating a net cash outflow of R15 000.00.”

“This is in comparison to a three bedroom house in Green Point worth R4 million, which also gives an annual rental return of R20 000.00 per month, i.e. R240 000.00 per year, but with an annual bond payment of R450 000.00 per year over 20 years, the net cash outflow of R210 000.00 per year.”

“Despite not being able to purchase property in the City Bowl and Atlantic Seaboard, property investors are still able to live an inner city lifestyle by purchasing property in surrounding suburbs and renting in the area that they choose to live in. This will enable investors to benefit from the lifestyle advantages that the city offers as well as the rewards that property investments offers,” concludes Rebe.