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Here’s how Cape Town property prices have exploded

Which areas have soared (while much of the rest of SA flat-lines)?

The average prices of property on the Atlantic Seaboard in Cape Town have more than doubled since 2012, and are up nearly sevenfold since 2001. And there’s no sign of a slowdown, yet, with a “massive” and still accelerating growth of 22.9% in the fourth quarter of last year. This research, conducted by FNB Household and Property Sector Strategist John Loos, used Deeds Office data across various sub-regions in the Cape metro.

Five areas outperformed the overall average house price growth seen across the metro over the past five years:

  • The Atlantic Seaboard (from Green Point to Hout Bay),
  • City Bowl,
  • The eastern suburbs near the city (areas such as Woodstock, Salt River and Pinelands),
  • The Southern Suburbs (extending from Rondebosch to Muizenburg), and
  • Southern Peninsula (including Simon’s Town, Fish Hoek, Noordhoek).

Overall price inflation in the metro is almost exactly double the national House Price Index published monthly by the bank over the five year period. Another way of looking at this is that other areas (smaller provinces, as well as mining and holiday towns, for example) have lagged dramatically, given that this data is all rolled up into the single figure.

In Cape Town, even recent laggards such as Somerset West/Strand and Atlantis have outperformed the index (and inflation) by 10 percentage points since 2012.

With inflation (CPI, as per Statistics South Africa) for the five-year period at a quarter of a percentage point under FNB’s House Price Index, in real terms, average house prices in South Africa have been flat. Let me repeat that: average house prices in South Africa have gone nowhere since 2012.

Of course, because this is a national average, it will not apply to every size and type of home in every possible area in the country. Loos’s detailed research shows the divergent performances of sectional title vs full title house prices (the former has marginally outperformed the latter), with smaller homes (especially in sectional title schemes) outperforming larger ones.

 Property prices in major metros have tended to outperform other cities and towns and those in former township areas in the metros have generally outstripped price growth in the broader metros.

However, the Western Cape and especially Cape Town has “significantly outperformed” the rest of the country, says Loos. The trend of ‘semigration’ to the Cape from (especially) Gauteng has certainly helped drive this demand. Brenthurst’s Magnus Heystek, among other commentators, has long been pointing this out (Emigrating or semigrating, from March 2015).

A separate report from Loos (Inter-Provincial Repeat Home Buyer Migration Trends) found that 56.2% of outbound repeat home buyers from Gauteng headed to the Western Cape last year. There is a similar trend in outflow from the Eastern Cape. The methodology is actually dead simple: Loos calculates what percentage of (and in what direction) repeat buying (i.e. the selling and then purchase by the same individual) is in a different province.

He says the “net inflow of repeat buyers to the Western Cape has been nothing short of spectacular, measuring a staggering 17.4% of the provinces total repeat buying, having accelerated steadily since 2009, and even more sharply from 2015’s 10.6% of repeat buying”.

He adds that “the further acceleration in net inflow repeat home buyers in 2016 explains much of the Western Cape’s far superior house price growth in 2016”. With this trend firmly in place, the rampant house price inflation in the five areas that have outperformed the broader metro is easily explained.

 

5 years

15 years

Atlantic Seaboard

104,4%

683,9%

City Bowl

89,9%

546,6%

City near eastern suburbs (incl. Woodstock, Salt River, Pinelands)

72,7%

432,4%

Southern Suburbs

63,6%

433,8%

Southern Peninsula

61,7%

411,2%

Cape Town Metro overall

59,9%

395,4%

Durbanville-Kraaifontein-Brackenfell

55,0%

393,5%

Blouberg-Milnerton-Melkbosstrand

53,0%

318,6%

Elsies River-Delft-Blue Downs

48,8%

507,7%

Cape Flats

44,3%

386,6%

Bellville, Parow and surrounds

40,8%

307,2%

Somerset West-Strand-Gordon’s Bay

39,2%

300,3%

Atlantis-Mamre

37,1%

525,6%

FNB House Price Index

29,24%

290%

CPI

28,97%

139%

Sources:  CT metro prices: FNB City of Cape Town House Price Indices; Overall FNB house price index: author’s calculations from FNB data; CPI: author’s calculations from StatsSA data.

Over a longer period, since 2001 when the FNB House Price Index started, two regions – Atlantis and those surrounding the University of Western Cape and Cape Peninsula University of Technology (to the north and east of the airport) – outperformed all but the City Bowl and Atlantic Seaboard.

In recent years, the commuter region of Bloubergstrand/Milnerton/Melkbosstrand is cited by Loos as one that has become more popular, perhaps because of the fact that it is “more affordable (or less in-affordable)”. But even here, year-on-year house price inflation in Q4 2016 was still 12.5%.

Loos does believe that a “little over-exuberance” has probably crept into the market, especially in the two regions (City Bowl and Atlantic Seaboard) that have vastly outperformed the rest.

He points to topography as one of the (obvious) major supply-side drivers, but adds two others: the city’s “growing traffic congestion challenge” as well as “the fact that some of the city’s prime business and employment nodes, most notably the CBD (Central Business District) and Claremont, are in close proximity to the mountain”.

“This should imply a longer-term shift in a portion of residential demand towards areas closer in proximity to the Cape Peninsula, and we believe it has.”

* Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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The tourism boom and AirBnB yields have also been a major driver of property price growth in the tourist areas (City Bowl and Atlantic). Both local and international “investors” have been gobbling up properties normally used for residential purposes and turned them into very profitable businesses – off the books of course, so that afer tax yield is very yummy even at the insane purchase prices. Escalating prices in these areas have a ripple-down effect to areas like the Southern Suburbs since locals simply have to buy down for personal residential purposes.

Median Atlantic Seaboard property prices are around R15m. At 13% transfer duty (paid from after tax money) that’s a lot AirBnB nights to sell in a relatively short season to pay it off. There are also too many property owners in the AirBnB market that purchased their properties years ago and price at a level that provides them useful income but is in fact poor in terms of the actual capital employed.

The top end prices just keep track with the overall trend. Flats going at around R50k per sqm; smaller houses R40k per sqm; big houses around R35k per sqm. Ofcourse the UHNWIs are impervious to the prices – it is the young professionals and emerging middle class that are screwed. Good luck finding a basic 3-bed family home in the City Bowl for less than R6m. Ofcourse AirBnB is not the only reason, but it is a big contributor – just about all my firends who are buying factors the potential AirBnB income into their calcs. And the season is about 8-months; with enough desperate interest to get winter tenants in.

NR people use air bnbs all year long. A well run air bnb more than covers a bond even at Cape Town purchase prices

My tiny little bachelor pad in Greenpoint for which I paid R1.4m two years ago (R35K/square meter) has a gross yield of 16.7% p.a. with Air B&B lets. Similar units in the block are selling for R2.3m (Gross Capital gain of 64% in 2 years).

Buy down, in the southern suburbs of Bishop’s court and Constantia?

Brilliant scheme, until you get your Eurtorash yobs posing as a respectable guests online and spread their faeces all over your Coricraft furniture in a Cocaine-fueled orgy…

Average property prices in SA have not gone anywhere in 8 years…..
In real terms average property prices are down 23% since the peak in 2008.
It coincides, amongst other things, with the rule of Zuma.

Semigration in anticipation of the Western Cape seceding from the Rupublic of Msholoziland?

Hout Bay tried tried that 15 years ago and ended up IsiWethu squatter Camp right on its doorstep.

Its residents burned & destroyed part of the Cape Cycle Tour roads, hence the organizers having to cut the route from 104 to 74km.

Then the Cape Doctor and blew our Cape Town lycra-clad visitors away….literally

what they won’t tell you about the city bowl – from a past resident of over 20 years – city bowl has become terribly congested, no parking. when that south easter blows – you can open nothing, no windows or doors!!! very very dusty!!

At least you can enjoy the abundant water supply and cool off while the “Cape Doctor” South Easter blows you off your balcony for half the year…..

and another thing(city bowl) – nothing special about living in a flat – no matter how much you paid – you still hear your neighbours noise, toilets being flushed upstairs, people walking, things being dropped, loud music etc!!!

Please stop your moaning already. Rather add some value to the conversation. Maybe you should have been investing in a portfolio of City bowl flats over the last 15 years instead of moaning about hearing your neighbor flush his toilet?

For many, living in the city bowl is fantastic, hence the huge demand and skyrocketing prices. Those who invested, developed or built businesses to meet this demand have deserved to do well.

Can’t be fun hearing your upstairs neighbour taking a dump while trying to enjoy peace and quiet in your R4Million entry-level matchbox Cape Town Apartment…

I think you added significant value to this conversation for me. Some people don’t understand the meaning of criticism.

The bottom line is that Cape Town is a well run city with competent people appointed to jobs that they are qualified to do. The city is clean, well maintained and safe. This can all be attributed to the fact that the ANC is not in charge. We all know what governance by the ANC means – just look at the cities where they are in control.

there is more crime in CT than Gauteng!! just take a look at what the DA has done to Adderley Street – loads of money spent on bicycle lanes, No Cyclists!!! The same in Woodstock & Salt River!!! Parking was taken away for this white elephant!!! affecting local businesses!!! if it’s speed bumps you want, you’ve come to the right place – 4 on Sandown Road in Rondebosch – 3, Yes 3, outside Bishops!!! lol!!! and so it goes!!!

The DA management was too busy tweeting about colonialism and pursuing accolades for how brilliantly they run the city to bother building any freaking dams for last 10 years!

The traffic “rush hour” isn’t an hour, it lasts just about the whole day from 6:30am till past 8pm. I am regularly hitting major jams even at 8pm at the Koeberg interchange Viaducts, another “brilliant” DA projct that has failed.

The much-vauted MyCiti bus service basically provides alternative transport for the “informal taxi” customers, as most feeder routes originate at informal settlements. So much for alleviating traffic congestion, and “clean, safe, trendy” transport.

All these development projects for housing encouraged by the DA has encouraged ballooning the population from 2 Million to 4 Million, without any uppgtade or building of new infrastructure (dams/roads/sewage works). Roads that were designed and built in the 1940’s are being used to cater fro 4 Million people. there is simply no more space to build new roads.

The water supply is collapsing, the traffic is a nightmare, and Cape Town has some of the most crime and gang infested places in the world (Hanover Park/Manenburg/Heideveld etc etc). these are literally a few minutes from “plush” overpriced suburbs that people think are so safe….

And let’s not mention the wind….not discussed in cliquey, polite Cape Town Social Circles……

Dams are the responsibility of the central government.

There are many reasons why the population has doubled including the fact that the C.T municipality works a lot better than any other city in S.A. and W.C’s GDP growth is double that of any other province.

Don’t be too smug.Property prices in CT’s prime areas will fall.Most of the population is dirt poor,have no jobs and live in the most appalling conditions,This is the basis for social instability in CT which will affect local property prices,as well as the regional economy.Not a question of if but when.

That’s what naysayers said about Hout Bay when an informal settlement was established right on their door step.

View the YouTube videos about home invasions and skyrocketing crime and grime in Hout Bay…

i wish more people would go live in LA LA LAND
A similar trend happened when everybody wanted to move to California , now they are leaving because no jobs
Meeeeeee follow the sheep
many go and find it is not that great , the people are unfriendly service is kak , etc etc

What FNB’s stats do not take into account is that the southern suburbs of C.T. are divided into 3 different price levels. Other than Rondebosch, the prices below the railway line are approximately 50% higher than similar suburbs in Jo’burg. Go above the railway line and prices double. Go above the M3 and prices double once again.

I am not surprised, the Western Cape scores the highest in the Human Development index of all the provinces (0.7708 – High), versus the 0.6675 – Medium for South Africa as a whole.

From Wikipedia: The Human Development Index (HDI) is a composite statistic of life expectancy, education, and per capita income indicators.

Funny how every body routed and support the DA to win elections, in JHB and Pretoria , just to criticize them in Cape town. The wind been blowing since forever, and nobody complain, now the Cape doctor is a problem.

Cape town is bursting, the same as JHB burst with the mines in the early days – people influx go where they think the money is, and currently they think the Western Cape is the future of SA, and I don’t blame them, it’s just better living in the western cape. All my family reside in western cape, just me struggling on in the old Western Transvaal. But on my way back, very soon.

all is not what it seems. 1stly, ignoring the atlantic seaboard, rest of city of cape town (that’s where FOUR MILLION PEOPLE LIVE)has gone nowhere. I sold my 4 bedroomed two bath roomed two garage home in tokai in 1983 for R125,000. today that house is worth – R4million max. in REAL terms (US$) that’s US$125,000 (in 1983 terms) to US$276,000 – massive real increase of 2.4%pa. that ladies and gentleman is what long term inflation does to your money

That is actually very good for a house. House prices track inflation over the long term.

except when you buy in one of the world’s hot spots – like Auckland and Sydney. the compound growth in Sydney since 1994 has been 8pa% – yes EIGHT PERCENT REAL GROWTH every year since 1994

well ladies and gentleman its now “nightoflongknives” +2 and already the rats are trying to extracticate themselves from the hole they have dug for themselves and the w cape property market is NO different. I strongly recommend that you peruse this weekend’s property argus to see the properties that have suddenly appeared. this is a 6 acre 6 bedroomed Constantia property for a quick sale of US5m- that’s a give away. https://www.property24.com/for-sale/constantia-upper/cape-town/western-cape/14239/104921248

but the best is to see the property agent comments under heading “Don’t panic sell”. all the usual high profile agents saying “Don’t sell”. what they are actually saying is “wait till I offload my property portfolio then sell!” sickening

Provided you don’t have to do the rush hour to the CBD or the Claremont area, Simon’s Town offers similar quality lifestyle at a quarter of the price of the Atlantic Seaboard. We sold two years ago and moved here … perhaps we should have waited.

But then hindsight is 20/20 vision.

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