With the sacking of finance ministers, the plummeting rand and a seemingly gloomy outlook, the SA economy isn't in great shape. Surely this would have a detrimental impact on the the property market? Possibly not, as Cape Town it seems, is oblivious.
Just last year, experts were claiming that there would have to be a sizeable price correction of South African property, and that buyers would be encouraged to hold off spending. Consequently, with locals struggling to pay interest, the national market would be forced down. However, in the Western Cape, where most foreign investors buy, it appears to be business as usual and Cape Town is booming in spite of the country’s economic woes.
Cape Town is to South Africa what London is to the UK, and any general economic and property predictions don’t seem to apply. Its important to remember that the performance of the housing market disguises a diverse range of trends at regional metro & suburban level. National averages are dragged down by under performing property markets in areas affected by mining and manufacturing sectors.
The Western Cape, however, remains the top performing regional economy. Property there just keeps on going up.
The FNB property barometer notes that in contradiction to market forecasts of single digit growth in house prices, the Western Cape defies trends by reflecting an impressive year-on-year price growth of 12 percent over 10 years. That is nearly double of the national average.
The Atlantic Seaboard of Cape Town has seen eye-watering price increases year on year. Property values grow annually at inflation-topping rates, in some instances as much as 13% to 22%.
According to local agents, the average sale price on the Atlantic Seaboard is almost 70% higher than what it was five years ago. In 2015, 676 units were sold for a total of just over R4.9 billion, at a phenomenal average price of just over R7.4 million.
Areas of particular significance include Camps Bay, where prices have skyrocketed. In 2010, the average price in the suburb was R6.5 million. By 2015, it was some 50% more.
Sea Point and Mouille Point, have seen enormous value growth since 2010 as well, and boast price increases of a staggering 144% in 5 years.
Recent Lightstone reports also confirmed the Cape’s clear status as market leaders when its research determined that Cape Town is home to seven of South Africa’s 10 wealthiest suburbs and seven of the countries 10 most expensive streets.
So what makes the Western Cape so successful? Its resilience is partly due to the well run local government. Then there is the obvious lifestyle benefits; the blue flag beaches, spectacular scenery, fine infrastructure and bountiful world class amenities to name but a few. People from both overseas and upcountry buy into the stability and the lifestyle that Cape Town property has to offer. Foreign investment increases annually. In Johannesburg agents say that up to 30% of house sales are now due to owners migrating their family down to Cape Town, and that doesn’t look to abate.
Cape Town also remains one of the most popular tourist destinations, and is often listed in Knight Franks wealth report as one of the most affordable luxury property destinations in the world.
Over and above obvious lifestyle advantages, it is the numbers that count. There is no doubt that Cape Town property values have consistently out-performed the other major centres in SA for over a decade, proving Cape Town to be the most stable market in the country.
For those who are holding off and waiting for the right time, it may be a risky strategy. A strategy that will only work if the rand plummets quicker that the property prices rise. The rate at which property is going up is reminiscent of London a few of years ago. There buyers worried about interest rake hikes and the gloomy UK economy which affected the UK countrywide. In London, people clung onto their cash waiting for the bubble to burst. It never did and many were priced out. By the looks of it, this situation could well happen in Cape Town.