Areas and Places

Cape Town dethroned as strongest property market

A view of Cape Town CBD.
A view of Cape Town CBD.

The Western Cape’s undisputed position as the market leader has provided consistent double-digit growth for almost a decade but, the playing field has been levelling since 2017 with Lightstone’s June 2020 house price index which reveals significant shifts in the local market place.

With a current growth rate of 4.8% per annum, Mpumalanga currently has the highest house price inflation with the Western Cape coming in at second place at 4.6%. The Northern Cape follows closely with a jump from 2.8% to 4.2% since June 2019.

Claude McKirby, Cape Town Southern Suburbs Co-Principal for Lew Geffen Sotheby’s International Realty says that over and above the impact of increasing political uncertainty, our subdued economy and the onset of a pandemic, the Western Cape’s decline is a result of over-inflated growth in the recent years.

What this translates to is certainly not all bad news as Cape Town property is now more affordable than it’s been in many years, but it still offers a very decent return at almost double the 2.42% national average”.

And certain suburbs and sectors are offering an even higher return, especially in the low to mid-value markets like Kenilworth where the median price of apartments has increased by 18.5% from R1.35 million last year to the current median of R1.6 million to date”.

The sectional title sector in Mowbray is also performing well, increasing by 36.36% from R1.1 million last year to R1.5 million this year and in Newlands where the average median grew by 20.9% from R2.35 million to R2.842 million during the same period.”

He adds that in established mid-market family-orientated suburbs such as Bergvliet and Kirstenhof, house price inflation is above the provincial average, albeit a much more realistic rate than in recent years.

Bergvliet has seen its median house price grow by 5.56% this year, from R3.505 million to R3.7 million and in Kirstenhof during the same period, by 6.38% from R2.35 million to R2.5 million”.

According to the report, the lower market segments are faring best on a national level too, with an annual growth rate of more than 5% whilst the luxury segment’s inflation rate is below 2% and, with a growth rate in the 4% zone, coastal provinces are also performing better than inland provinces which achieved between 1% and 2%.

The Cape Town Winelands is at the lower to mid-end of the market and it has also been fairly resilient, especially houses priced under R3 million and apartments for under R1million, which are still selling well.

But in several areas, the house market has also performed especially well, despite the economic and pandemic woes.

In Simonswyk to the east of the town centre, the median house price has continued to rise steadily,” says Chris Cilliers, CEO and Co-Principal of the groups Winelands office, “from R2.525 million in 2018, to R2.65 million in 2019 and again by 38.67% to R3.675 million this year despite economic and pandemic woes.”

As the most affordable suburb within walking distance of extremely popular schools, it has been attracting considerable interest in recent years”.

“Paradyskloof has also remained consistent, increasing from R3.775 to R3.95 million last year and again by 6.32% to R4.2 million this year whilst in Onder Papegaaiberg, after dipping from R2.8 million in 2018 to R2.66 million in 2019, the average median price jumped by 12.78% to R3 million this year.”

Cilliers adds that there has also been encouraging buyer interest in luxury homes in recent months, with some properties even selling at full asking price, although generally prices have been adjusted to meet market conditions and many investors have benefitted from significant price reductions.

There are a number of serious sellers at the top end of the market at the moment, especially those who have been wanting to sell their homes from the beginning of the year and already had confirmed emigration or semigration dates.”

McKirby concludes: “The market is under unprecedented pressure as the modern world has never had to contend with a global pandemic of this scale which has unleashed a flood of new uncertainties”.

“But with interest rates hitting historic lows and buyers spoilt for choice with plenty of deals to be had, right now property is definitely one of the most stable investments one can make, especially when compared to a very volatile global stock market”.

“The real estate market always works in cycles with upswings followed by downturns, regardless of the prevailing economy or political sentiment”.

“And those who take the plunge during a downturn not only obtain a property they may not normally able to afford, it’s also a rewarding investment when the market turns again.”