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"Cape Town CBD residential market boom"

Posted on Tuesday, 27th Oct 2015

Cape Town CBD residential market boom

BOOM TOWN: 2014 was a record year for residential sales in Cape Town’s CBD, with properties to the value of R856 million changing hands. Picture: Cape Town Central City Improvement District.

The steadily growing demand for residential accommodation in Cape Town’s central city shows no signs of abating after a record year in 2014 when around 530 apartments were sold to the value of R856 million.

The CBD apartment market last peaked during 2007 with 463 sales worth R730m, according to Lew Geffen Sotheby’s International Realty Atlantic seaboard chief executive, Brendan Miller, who says that between January 2014 and June 2015, 682 sales took place to the total value of R1.093 billion.

“This equates to a very accessible average apartment price of R1.6m at R20 160/m², and when you consider all the amenities that come with city living, it’s very reasonable compared with Atlantic seaboard apartments that easily sell at around R45 000/m².

“We expect the average price a square metre in the CBD to increase quite dramatically towards the end of next year when several new developments in planning get to the transfer phase, though, so anyone considering an investment would be wise to move quickly before prices move into the realm of around R35 000/m².”

Citing Deeds Office figures, Miller says that a price band analysis of January 2014 to June 2015 shows that properties priced under R2.5m have been most in demand with around 570 sales realised to a combined value of R680m.

“At mid-market level, almost 100 properties priced between R2.5m and R5m were sold to the value of R313m, and at the upper end of the market 13 properties in the R5m to R10m price band changed hands, with one property at 15 on Orange selling for R13.13m.”

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, says: “Between 2008 and 2014 the growth in rand value in the area was 174 percent and unit sales increased by 131 percent.

“During 2008 the total rand value was R313m, but by 2014 that had shot up to R856m. Sales volumes over the same period went up from 230 to 531, whereas the average apartment price went up by 19 percent from R1.36m to R1.612m.”

Miller says the exponential growth in the CBD residential market has been spurred by several key factors. Investor confidence in the growth trajectory of Cape Town’s CBD has inspired a major renewal of the city centre as well as new commercial and residential development, and many commuters are simply no longer prepared to waste time in traffic – even if this means cutting back on living space and sacrificing ‘luxuries’ such as gardens.

According to the Cape Town Central City Improvement District’s State of the Central City Report 2014, the overall nominal value of all property in the CBD in the 2007/2008 financial year was R5.641bn. In the 2014/2015 financial year, the value had more than quadrupled to R23.724bn.

“This shows just how confident investors are in the future of Cape Town’s CBD – as a commercial and a residential centre,” says Miller, who estimates that the residential population has grown to more than 6 000 inhabitants.

Says Geffen: “The new development in recent years has also had an excellent influence on return on investment (ROI) in the residential market in the CBD.

“The average nominal percentage ROI over four years as measured in 2015 is a solid 19 percent with buildings such as The Adderley realising 21 percent over five years, Mutual Heights at 23 percent over four years, Mandela Rhodes Place at 17 percent over seven years and Cartwright’s Corner reflecting 13 percent over four years.

“This certainly bodes well for investors looking at entering the CBD residential market as there are still many upgrades and developments in the pipeline, which will increase the demand for accommodation as well as push up the value.”

The Cape Town International Convention Centre is due to double in size and construction of the new Christiaan Barnard Memorial Hospital is well under way. Premium office space in Cape Town’s newest skyscraper Portside is also being taken up at a steady rate.

Two major residential projects in the CBD have been announced so far this year as well, which will add more than 200 units to the available residential market.

According to Geffen certain sectional title developments were very popular with investors between January 2014 and June 2015.

“Mandela Rhodes Place claimed pole position with 60 sales to the value of almost R120m at an average of R22 000/m². Senator Park, The Adderley, Perspectives and the Icon building are also sought after, all realising more than 40 sales a block with prices a square metre ranging between R15 000 and R30 000.”

Miller says: “More and more Capetonians are beginning to follow the global trend of trading in their suburban homes for the convenience of city living and we are seeing that correctly priced apartments are, almost without exception, snapped up within four to six weeks of being listed.”

Posted in Cape Town - Property News

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