Where To Invest In New Developments In Cape Town
Housing markets across the globe, influenced by several political-economic factors, are experiencing a slowdown in house prices. Closer to home, the out-look for 2019 is somewhat brighter after a tough 2018. ‘Sweet spots’ within the residential market are certainly prevalent and buyers still perceive property ownership as the cornerstone of wealth creation. These are just some of the reasons to be cau- tiously optimistic.
According to Lightstone’s forecast, GDP will grow between 0.75% and 1.5%, and CPI will range between 4.0% – 5.5% for 2019. Lightstone’s data scientists modelled three different scenarios for house price growth for the year. In the high road scenario, Lightstone predicts that house prices will grow by 4,5%. This drops to 3% in the mid-road scenario, and 2% in the low road scenario.
What’s more, Paul-Roux de Kock, Analytics Director at Lightstone, predicts a positive economic turnaround post- election, which is likely to stimulate the property market. However, if the coming general election goes smoothly, it will bring confidence and certainty back to the market and the economy, and hopefully be the catalyst that creates positive strides in the right direction. This is in line with de Kock’s prediction that there remains the potential to end the year breaking through the forecasted percentage for the high road scenario altogether.
Cape Town property is a sure thing
Despite Eskom’s woes, land repatriation debates and Zuptagate headlines to depress even the most optimistic of investor, Cape Town consistently bucks the lackluster property price trends witnessed by the rest of the country. Knight Frank’s 2018 Wealth Report ranks the city’s property market as the world’s second-top-performing market, and this is reflected in the high prices for asked- and received-for property in the Mother City, with the Atlantic Seaboard and City Bowl showing a combined growth of a whopping 111% for the past five years. The city centre, too, is growing in popularity.
Inflation has been kept under control, with consumer debt-to-income ratios dropping from highs of 87% in 2008 to 72% in 2017. Interest rates over the past few years have been low, which has sustained the property market at a steady pace, and even though there was a rise in 2017, it hasn’t affected the property market in a significant way.
Major developments also boost the entire vicinity in which their property is located – creating other opportunities for investors. ‘With our extensive property experience, the value of the assets we manage is optimised by improving the asset itself as well as the surrounding area, resulting in property values increasing and seeing a positive return on investments,’ Investicore’s Dawie Swart, CEO, says.
The Pinnacle Building, previously home to Cape Town Tourism, undergoing redevelopment by Investicore and is evoking significant interest from both residential and commercial investors, according to Swart.
The Urban Artisan residential building and 97 Durham Avenue, both in Salt River, are perfect examples of successful enterprises developed by Investicore. The success of these projects is not only reflected in the profitable income from these premises, but most importantly how they turned this once-derelict industrial area into a sought-after address.
Cape Town’s tourism industry is resilient
Despite gloomy tourism figures, high levels of interest from international and local operators point towards robust development from 2020 onwards.
Despite South Africa’s recent technical recession and a drought that crippled many areas of Western Cape business,foreign tourism rose by 2.4% in 2017, building on a 12.8% increase in 2016. Domestic travel showed the greatest increase since 2014, rising 4.2% in 2017 – well above the gains of less than 2% in 2015/16.
‘The odds have been against us, what with a constrained economy, a drought, tourism visa issues and questions around electricity supply,’ says Wayne Troughton, CEO of HTI Consulting, ‘yet despite this we’ve never before witnessed the levels of interest we’re seeing right now from international and local operators wanting to expand or launch into, specifically, Cape Town, with the CBD being high in demand.’
Cape Town remains the country’s top tourist destination. The city was named the World’s Leading Festival and Events Destination at the 2018 World Travel Awards in Lisbon, and the International Congress and Convention Association ranked the Mother City as the best business tourism city in Africa.
Demand for hotels in Cape Town has grown exponentially since 2012. Between 2012 and 2017, the occupancy and average daily rate (of the Cape Town market as a whole grew at a compounded annual growth rate of 3% and 10.7% respectively.
‘Cape Town’s current hotel offering covers a broad variety of markets, including corporate, government, leisure and conferencing/ groups, so we’re trying to encourage developers to cater for several of these groupings as a means of limiting their risk,’ says Troughton. ‘Of course, there are great cost savings for operators already established in the city, as you can synergise certain functions, such as the outsourcing of laundry or staff functions such as financial controller, between your various properties.’
Although the Waterfront remains the number-one area of demand for development, the Foreshore is witnessing unprecedented interest. The expansion of the Cape Town International Convention Centre, along with the opening of the new Netcare Christiaan Barnard Memorial Hospital, has triggered further developments: The Onyx, a new apartment- style residential hotel, a 200-room Cape Town Marriott Hotel Foreshore and a 150-room Residence Inn by Marriott Cape Town Foreshore, both of which will be built at the Harbour Arch.
Interest from private developers is growing too, notably with the soon-to-open Gorgeous George, a 32-room luxury boutique hotel in two refurbished heritage buildings on St George’s Mall. With precincts similar to the Foreshore, such as upper Adderley Street/Wale Street, Bree Street, and the East City Precinct/the Fringe/lower District Six, witnessing massive urban renewal, Cape Town has begun to offer a totally new, unconventional inner-city tourism experience – something different from the typical Waterfront-Camps Bay- Cape Winelands offering.
Managing Director of Gorgeous George, Wessel Botes says: ‘Experience has shown that once redundant inner-city buildings are brought back to their former glory and turned into stunning design-led hotels, much like what ACE Hotels are doing in London’s Shoreditch or SOHO House in Manhattan’s Meat Packing District, those areas begin to attract a whole new tourism market, and one that’s far more appreciative of design, culture, art, fashion, architecture and so on. Cape Town’s Strand Street, St George’s Mall and the East City Precinct offer that.’
First-time buyers in Cape Town
‘Top suburbs for first-time buyers in Cape Town are found in the Northern suburbs, particularly Brackenfell, Kraaifontein and Kuils River. Property on the Western Seaboard remains relatively affordable with new suburbs like Sunningdale and Parklands that have been developed to cater for the increased demand in the area.
And then we have the showponies: Despite more subdued trading conditions during the past two years, the average selling prices of the Atlantic Seaboard’s top five suburbs, which are incidentally also the top five suburbs in the country, have surged past the R15m average selling price for a full title house and is edging closer to the R20 million price mark.
Lance Cohen and Simony Santos, Seeff’s luxury market team for the Atlantic Seaboard note that while overall sales have been slower since early last year, buyers have still paid significantly for the right property. ‘We see for example that full title sales in the R20m-plus sector for the 2017-year exceeded R1bn at an average selling price of R32.5 million, most of these coming from the Big Five suburbs and prices ranging to over R100m in Clifton.’
Seeff ranked the top five suburbs according to the average selling price (for a full title house) for the 2017-year based on a mix of Propstats and Lightstone data. With all the anomalous sales removed to give an accurate reflection the average selling prices, these rank as:
1) Clifton – R18m
2) Llandudno – R17.8m
3) Bantry Bay – R17.7m
4) Camps Bay – R17.7m
5) Fresnaye -R16.6m
Over 80% of sales were to local Cape buyers followed by Joburg and foreign buyers who comprise only about 20% of all sales. Llandudno were almost exclusively local buyers.
According to the agents the notable price shifts evident over the last five years have been driven by high demand from local Cape buyers and from Joburg (and other wealthy upcountry) buyers rather than foreigners. Joburg buyers have invested over R500 million in top end Atlantic Seaboard property over the last year.
The property trends we’re noticing
Younger buyers are opting for smaller homes because of cost considerations as well as the reduced maintenance load. A trend being seen in cities around the world is the emergence of the micro-unit, between 20% to 30% smaller than a conventional sized studio. This allows for a more affordable rental option for those wanting to live close to work. In Cape Town’s CBD, a micro-unit would be about 35m2 with a monthly rental of between R8 530 and R9 749.
‘The concept behind micro-living is creating a neighbourhood within the building, and at The Pinnacle, we’ve done just that,’ says Swart. In this micro-community where like-minded individuals live together in fully integrated social spaces.
The micro-apartments offer cost-effective levies, and the rates and bond repayments are manageable. What’s more, “At The Pinnacle there are no transfer costs, which is a great help to first-time purchasers,” says Emanuel Germanis, managing director of Evolution Properties, which has the sole-mandate to sell The Pinnacle.
Lock-up-and-go Go Go Go
With more people downscaling for life choices, rather than financial reasons, we are seeing a growing demand for upmarket, lock-up-and-go living, while mixed-use developments are proving increasingly popular. The new Harbour Arch development offers a live-work-play lifestyle in the upcoming Foreshore area, close to the V&A Waterfront, where 418 of the units have already sold off-plan in phase one. Located in prime position at the entrance to the V&A Waterfront and the city centre, the 5.8-hectare precinct will provide the largest selection of residential apartments in the CBD, as well as landscaped public spaces, shops, restaurants, international hotels, health clubs and office space. Apartment sales in No 1 Harbour Arch, the first of the residential towers, have passed the R1 billion mark, with over 96% already sold.
A fairly new trend is the development of boutique or bespoke estates comprising of only a few homes, but offering the same security and amenities as their larger counterparts. Paardevlei in Somerset West, offers just six homes, starting at R4.29 million. In Cape Town, we have seen several of these bespoke developments in established suburbs such as Upper Claremont and Constantia, where land for new developments is at a premium. Brommaert Terrace in exclusive Constantia Upper is a bespoke estate with six luxury homes, designed with family living in mind and brought to market by Kingshill Group, an established developer in the Southern Suburbs. Two of the homes are already under offer, and the remaining four are listed for from R13.95 million, including VAT. A 10% deposit secures the home, with the balance payable on completion of the project.
With growing congestion, as well as rising utility and maintenance costs, more homeowners are looking for a lock- up-and-go lifestyle close to work. We are seeing considerable residential growth in emerging economic nodes where mixed- use developments have created investment and employment opportunities. Economic activity is being decentralized from the traditional CBD in Cape Town, to other areas such as Claremont, the Tyger Waterfront near Tygervalley and Century City.
Buyers want well-located properties that reduce the daily commute to work and school. Claremont, with its prime location, has attracted more businesses to its CBD and is home to more than 12 financial institutions, as an indication. The Tyger Waterfront has grown into a vibrant economic node with a 50/50 split of residential and commercial properties. Popular with young professionals working at the many corporate and financial headquarters nearby, as well as students attending the Tygerberg campus of Stellenbosch University, Tyger Waterfront’s rental sectional title units are in high demand.
What are tenants and buyers looking for in 2019?
Housing trends are forever changing. While shaggy carpets and pink porcelain bath tubs might have made a property highly sought after in the 1960s, this kind of property would be a tricky sell in 2019.
‘Those who want to purchase real estate in the hopes of flipping and reselling for a profit, or simply to generate a secure stream of rental income, should keep an eye on current market- related trends to ensure that the property they purchase will be in high demand in the year ahead,’ explains Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.
To help buyers choose such a property, Goslett predicts some of the trends that will come to dominate the 2019 real estate market:
Sustainable Eco-Friendly Housing ‘The Western Cape’s water crisis last year shone a spotlight onto sustainability and environmentally responsible ways of living. For those less concerned about the effect they’re having on the environment, the ever-rising cost of living and looming threat of national electrical outages provide more prudent reasons for why homes with self-sustainable features are likely to become increasingly attractive in 2019,’ Goslett predicts.
Homes with Rental or Sharing Potential ‘Another trend which has been emerging is the growing demand for homes that are able to accommodate beyond just the nuclear family unit. With property prices shifting beyond the reach of entry-level buyers and in favour of the middle- income buyer, many are choosing to live with family members or to sub-let rooms in order to cover the rent or the bond repayment amounts. Two- or three-bedroom homes with en- suite bathrooms and possibly separate entry points or garden cottages should therefore do well in the 2019 market,’ Goslett says‘.
We’re seeing huge interest by city workers anxious to spend more time enjoying their spare time and less time commuting,’ says Evolution Properties’ Germanis. And, with Cape Town a tourist mecca of the country, short-term letting is a great way to get a higher return on your investment. ‘Many homeowners are going this route to make a profit and get those bond repayments down,’ he says. Vacation and rental management company Totalstay will provide a short-term hospitality management offering at The Pinnacle, making it even easier to rent out your apartment.
An overview: Estates and Developments across the Western Cape
High prices in Cape Town will mean more first-time home buyers will be looking in up-and-coming areas such as Salt River, Woodstock and Observatory; further up the seaboard into Blouberg; as well as the Durbanville and Kuils River nodes.
Val de Vie, Paarl
South Africa’s top residential estate, has seen record sales over the past 12 months, with resale transactions in excess of R885 million. This is a 61% increase from the previous year when property resales of R549 million were concluded. With developer sales of over R338 million for the past year, the total sales for Val de Vie are over R1.2 billion over this period. Val de Vie continues to perform well because of its diverse portfolio of properties.
Salt, Salt River
SALT, a new mixed-use development which offers 184 one and two-bedroomed apartments of 55.4sqm and 78.4sqm in Salt River. Apartments are priced from R1.295m. There is enormous interest in the Woodstock-Observatory-Salt River areas, says Steven Holvec, Developments Manager for Seeff Southern Suburbs.
An added benefit, buyers and investors should note that the SALT development falls within the Urban Development Zone which means that investors can take advantage of the UDZ Tax incentives.
Yacht Club, Cape Town CBD
Early property investors who bought into The Yacht Club – developed by the Amdec Group – enjoyed a significant return on investment in the first year, and exceptional capital growth in the two-year construction period. The 170 apartment development spanning 30 000m2 launched at R48 000/m2 in September 2015, with the last units selling for R75 000/m2 just over one year later. The success of The Yacht Club is a positive indicator that mixed-use developments in the CBD are in demand.
“Cape Town is booming, especially the foreshore area and Roggebaai Canal precinct where the Yacht Club is located,” says Amdec Property Group’s MD Nicholas Stopforth.
The Pinnacle, CBD Cape Town
The Pinnacle offer 239 well-priced, spacious and secure sectional-title apartments. Getting your foot on the property ladder isn’t easy for first-time buyers. Lack of affordability, appropriately sized stock and suitable locations are all barriers to entry, with many people having to stay in the rental market due to these challenges. Dawie Swart, CEO of asset- management company Investicore, recognised these obstacles. “For a long time, the first-time home-buyer market in Cape Town hasn’t been easy to penetrate, and I wanted to change that,” he says.
The Pinnacle building in the heart of Cape Town, a recent Investicore purchase, will offer 239 well-priced apartments, with 48 already sold off-plan in the first two months.
We have been involved in the marketing of several developments including The Glengariff and 169 on Main in Sea Point.
Observatory and Stellenbosch
With tertiary institutions unable to meet the demand for residences for their students, developments such as Obscourt in Observatory and Da Vinci in Stellenbosch provide much- needed accommodation with the amenities students and young professionals seek. We have concluded more than 113 resales of apartments in Obscourt to the value of R150 million, underlying the need for this kind of accommodation close to public transport and other amenities. In Cape Town’s CBD too there is a need for affordable accommodation, given that there are 84 educational establishments in the central city.
Boland and Overberg
This magnificent wine farm between Stellenbosch and Somerset West was sold by Pam Golding Properties’ established team of agricultural properties specialists.
With its breathtaking views and secure, luxury lifestyle, this remains one of the most sought-after estates in the Cape Town and Boland areas.
Western Cape in general
In the first six months of the year ( January to June 2018), there were nine sales at the Waterfront marina and even the older apartments, of 10 years and more, have sold for upwards of R7 million because of their considerable investment potential. A 16-year-old apartment in Parergon on Quay Road sold for R20 million, with a R/m2 of R121 000.
169 on Main: Still under construction, 169 on Main is perfectly positioned on the Atlantic Seaboard’s ‘Silver Mile’ in Green Point. The luxury apartments start at R3.65 million.
Harbour Arch: This new mixed-use development in the upcoming Foreshore area will provide the largest selection of residential apartments in the CBD. Apartment sales in No 1 Harbour Arch have passed the R1 billion mark, with over 96% sold.
Silo: As traffic congestion escalates, people are looking to live in self-contained nodes that offer security, convenience and easy access to popular attractions, such as the Waterfront’s Silo District.
Pinelands Grove: Self-catering apartments in Pinelands Grove are well priced, started from R495 000 to R575 000 for a studio unit.
Obscourt: Well-located in Observatory close to various tertiary institutions including the Groote Schuur Hospital and the University of Cape Town, Obscourt is proving popular with students and young professionals.
16 on Bree: which includes formal meeting and hot desk spaces to accommodate residents who want to work remotely but still be close to their homes.
Richwood, Bothasig and Burgundy Estate
Richwood, Bothasig and Burgundy Estate for example offer plenty below R1.5m. The areas have easy access to the N7 and N1 and are close to the Table View, Milnerton, Blouberg and Century City areas making them sought-after options for budget-conscious buyers according to Johan Jacobs, Seeff licensee for the areas.
In Bothasig and Richwood, you can find a house in the R1.3m-R1.5m price range while Burgundy Estate offers apartments from R1m, houses from R1.8m and rentals from R8,500/month.
Mitchell’s Plain, Capricorn Beach Estate and Costa da Gama
Cape Town’s South Eastern Suburbs also offer great affordability according to Gary Grobbelaar, CEO for Seeff False Bay and SE Suburbs. Mitchell’s Plain for example offers excellent small houses in the R500,000-R900,000 price range.
Adjacent to Muizenberg, at the bottom end of the M5, you will find Costa da Gama and the Capricorn Beach Estate, both offering excellent affordability, he says. Capricorn Beach Estate offers several developments with a mix of apartments and townhouses in a secure setting with play parks for children, two swimming pools and a walkway to the beach. Prices range from around R1.2m for a small two-bedroomed home in the estate.
Costa da Gama also includes a number of developments such as Villa d’Algarve, a beach front estate where you can buy a three-bedroomed ground floor apartment for R1.2m according to Seeff agent, Paul de Roos. Sunrise Villas offers a temperature controlled swimming pool and apartments in the R850,000-R950,000. A little further back, you can find a three bedroomed home for R1.3m in Cannon Island Villas.
Brackenfell, Kraaifontein and Kuilsriver
Karla Coetzee, Seeff’s Manager for the Brackenfell, Kraaifontein and Kuilsriver areas says that although it is a bit of a commute to the city and beaches, it is well worth it for the price paid per square meter.
Prices start at around R500,000 for a flat in Kuilsriver (St Dumas) and upwards of R980,000 for houses (Highbury and Hagley). Kraaifontein apartments start at R650,000 (located in well-known estates) and spacious houses from R850,000 (Belmont Park, Peerless Park East and West) while homes near Cape Gate Mall start from R1.4m. Brackenfell flats are popular therefore they range from R750,000 and townhouses at R1.5m.
Spacious plots, sizeable houses, fabulous views and close proximity to the city are some of the reasons why many high net-worth professionals and families are now choosing to buy in the Plattekloof area according to Johan Jacobs, Seeff ’s licensee for the area.
The result is that Plattekloof property values continue to appreciate and the suburb now ranks as one of the top three suburbs of the Cape Town North area, attracting some of the highest prices, boosted by the Baronetcy Estate.
These days, it is not uncommon for luxury buyers to pay well into the upper millions for a luxury home on a big sized plot and we are beginning to see average prices of R4m-R10m in the northern suburbs, he says. High net-worth buyers are seeing these areas as a more laid-back alternative to the busy City Bowl suburbs and the pricy Southern Suburbs. They get more bang for their buck here, says Jacobs.
Lightstone shows that the Plattekloof property market has remained steady.
There is also a good mix of sectional title and freehold property on offer in the area (and its extensions) along with security estates such as Baronetcy Estate, Leopard Rock Estate, Kleinmeer Estate, La Vie and complexes such as Villa Caponero, Little Rock, Silwerkloof and Plattekloof Gate.
While top prices of R20m-R30 million are becoming more commonplace, especially in Baronetcy, the average price of freestanding houses range from around R5 million to about R10.85m for a large five-bedroomed home with a separate flat on a plot of 1236sqm.
In the complexes, you can expect to pay upward of R2.7 million for spacious two to three bedroomed homes. There is also still some vacant land available in the area.
Jacob says that access to excellent schools is another big draw-card for upper income families.
The CBD’s new kids on the block
Developed by the Amdec Group, South Africa’s leading developer of New Urban lifestyles, The Yacht Club is located within the Roggebaai Canal precinct just outside the V&A Waterfront; it comprises 170 luxury residential apartments, 6307m2 of prime office space, and the AC Hotel Cape Town Waterfront.
EIGHTONN’s by Blok
Located between the tranquil Atlantic Ocean and vibrant Main Road, this development provides convenient access to a number of public amenities that encourage an active lifestyle such as sandy beaches, tidal pools, a promenade perfect for sunset strolls and a bustling abundance of eateries and shops lining Sea Point’s main strip.