Areas and Places

Northern Suburbs rental market in historic boom, prices surge

The recent development of some of the last remaining land in Cape Town’s Northern suburb of Burgundy Brackenfell has caused a massive boom in the rental market, with prices skyrocketing over the past year.

As a result, many investors in the area now find themselves in the uncommon position of being able to cover their bond and other costs within a year of purchase.

“We have also seen an astonishing increase in the demand for quality rental accommodation, which in turn creates a huge demand from investors. These factors, combined with the fact that there is very little stock available at any given time, have also caused house prices to surge significantly,” says Erik Joubert, Managing Director at Trinity Projects, which has developments across the Peninsula including in Durbanville and Somerset-West.

Joubert says the property trends in Brackenfell are unprecedented and noteworthy.

“Across the Peninsula, as we have also seen with our developments in Durbanville and the Sitari Estate in Somerset-West, there is an upward trend as a result of supply and demand factors. Additionally, because of the relative difficulty encountered by first-time home buyers, the demand for rental properties has been on the increase and shows no sign of easing off in the foreseeable future”.

“However even within this context, the growth in Brackenfell is off the charts.”

Trinity Projects Director Leroy Viljoen says all the homes in its last three security developments in the Burgundy area of Brackenfell are completely sold out. The first two developments, Westmont and Figaro, saw a major influx of young professionals and their families in the past two years, while its latest development, The Brittany, was snapped up in one go by a single investor.

Despite resales of the first two developments now having started, there is rarely a property that comes to the market. And when one does, it comes with a huge return on investment. When a property does come onto the market, it is snapped up in record time, sometimes within hours. Yet despite this growth, and because of the excellent rental returns being achieved, investor owners are holding firmly onto their properties.

“We conservatively estimate capital growth in these developments at about 14% – 20% per annum, which is up from 11% the previous year. In a recent sale at Figaro, one investor achieved a 50% capital growth within 16 months.”

Viljoen says rentals being achieved in the area now range between R14 000 – R18 000 per month for a 3-bedroom home, which is a steep rise from before the development of the Burgundy in Brackenfell – a development which saw an entire community arise where previously there had only been empty land.

“We believe the changing face of the property market in this neighbourhood can be ascribed to the changes in this community over the past few years. The development of safe, green security estates with award-winning landscaping, which are within walking distance of top new private schools, has had a ripple-effect on the area as a whole,” he says.

Joubert says although currently there are very limited opportunities in the area, the good news is that a number of rental units will come onto the during October 2016 as the final development nears completion.