While house price growth remains stagnant throughout most parts of the country, the Cape Town housing market continues to thrive and grow due to continued demand, says Kevin Jacobs, Broker/Owner of RE/MAX Premier, whose office services Cape Town’s Southern Suburbs and surrounds. He adds that much of the demand in the Cape Town market is a result of people from the Northern parts of the country moving down to the Western Cape.
“Few other cities can mimic Cape Town’s unique offering, such as its diverse landscape, complex history, world-class wine region and some of the most spectacular real estate in the country. While a truly African city, Cape Town has a global outlook that has attracted strong investment from both local and foreign buyers,” says Jacobs. “Cape Town’s Southern Suburbs have gained particular attention from buyers living in other inland cities such as Johannesburg, who are looking for a more relaxed outdoor lifestyle and better work and play balance, a seemingly better level of safety and governance. Another drawcard includes better capital growth on property investments.”
According to house price data from First National Bank (FNB), the average price of a home in Cape Town is up nearly 80% since the start of the post-recession recovery, a trend not seen in other cities in the Northern parts of the country. In fact, both Johannesburg and Durban’s house price growth was less than half that of Cape Town. “While it is impossible to predict whether Cape Town property prices will remain on such a strong upward trajectory, they are currently outstripping prices in other major metropolitan areas. In other parts of the country house price growth is expected to be at a sub-inflation rate of between 2% and 3% per annum over the next five years. If inflation is factored into the equation, this means that house prices are declining – a reason why many are looking to move to the Cape,” Jacobs explains.
He adds that a large percentage of buyers that his office handles are cash buyers or those who need a low loan-to-value bank loan. “The average buyer profile in the Southern Suburbs are high-net-worth professionals who have money on hand to get into the Cape Town market. As a result, very few of our deals are lost due to affordability or finance issues, which are experienced in other regions,” says Jacobs.
Although the Cape Town’s thriving property market is positive, it does pose some challenges to buyers purchasing a home for the first time. While existing homeowners and those who have the finance to enter the market have benefited from the rapid price growth, first-time homebuyers are struggling to get their foot in the door because they are being priced out the market. “In a city such as Johannesburg, first-time buyers account for around 27% of the market, while in Cape Town it is much less. If you go by FNB data, in 2016, approximately 8% of housing transactions in Cape Town were concluded by first-time buyers – reflecting the strain the price of property has put on the younger, up-and-coming buyer,” says Jacobs.
He concludes by saying that while the need for more affordable housing options for first-time buyers will need to be addressed, those with access to finance to get into Cape Town market will continue to reap the benefits for the time being.