Why buyers love Cape Town property

27 Jun 2014

 

New research by Candy GPS Report May 2014 which looks at the global prime residential sector and beyond, notes that for many ultra-high-net-worth individuals (UHNWIs) real estate has become a unique asset class with investment to date focusing on prime property in the top tier world cities, which have shown record market growth.

This luxury villa was sold by Seeff for R55.86 million, the highest price achieved on theAtlantic Seaboard this year.

As these cities start to show signs of becoming fully valued, investors are looking at alternatives, both in secondary and second tier cities, and as a result, the research identified 12 rising cities with the potential to show strong residential property price growth in the coming years.

Cape Town in South Africa is ranked number 9 on the list and is one of two African cities ranked in the report. The report notes that the typical price of two bedroom apartments range from $110 000 (for a secondary market) to $370 000 (prime market).

Furthermore, the report reveals that Cape Town made it into the list because of its high quality of the lifestyle and the relative safety of the city, which continues to attract property buyers and investors

Cape Town is a high profile and easily recognisable city with a strong international company presence, add to that, poor current market conditions due to the weak rand as well as high inflation and high interest rates, and this means that bargain hunting is possible and the city looks cheap on an international scale, notes the report.

According to the report, Cape Town has a population of 3.7 million people with GDP of $56.8 billion and GDP per capita of $15 721.

Meanwhile, the other African city ranked in the report is Lagos in Nigeria sitting at number 11 with a population of 21 million people, $90 billion GDP and $7 500 GDP per capita.

In this city, two bedroom apartments range from $70 000 (secondary market) to $300 000 for prime property.

Of interest, is that Lagos is not only a very fast growing city but it is generating a large and growing number of UHNWIs.

The sheer size and power of the city, fuelled by oil and natural resources points to real estate growth, as does the increasing productivity of its young population, according to the report.

However, unlike Cape Town, lifestyle, safety and quality of the housing product is still an issue.

According to the report, real estate is unique among asset classes and investors see real estate as far more than bricks and mortar, but rather a dynamic asset class that combines capital appreciation with significant income potential.

Prime residences are particularly scarce and therefore show the highest price multiple over secondary stock in any of the cities ranked in the report. For example, prime to secondary ratio is 4.29 compared to Cape Town’s 3.36 or number one ranked Tel Aviv in Israel where the ratio is 2.90, while Melbourne in Australia ranked number 2 has the lowest ratio of 2.11.

Tel Aviv commands the highest prices of between $500 000 to $1 450 000 and Melbourne has prices of between $320 000 and $675 000, and Miami in the USA ranked number 3 has prices of between $275 000 to $900 000.

Other cities ranked in the report include Chicago in the USA, Dublin in Ireland, Panama City in Panama, Beirut in Lebanon, Istanbul in Turkey, Jakarta in Indonesia and Chennai in India with prices of between $40 000 and $60 000.

Cape Town property market

According to Margie MacKenzie, director of Cape Waterfront Estates in Hout Bay and Camps Bay, the Cape Town property market is very good at the moment as both local and international buyers are snapping up well priced properties.

“Foreign investors are paying a lot of attention to the South African property market and I believe the opportunity for capital growth is excellent,” explains MacKenzie.

She explains that property on the Atlantic Seaboard sells very well, if priced correctly, and with Cape Town’s recognised beauty, the World Design capital of 2014 and only a short flight from Europe, it’s a fabulous place to have a holiday home.

 

Priced at R28 million, this nine bedroom home at De Goede Hoop Estate in Noordhoek is selling through Pam Golding Properties. Click here to view.

Meanwhile, Seeff chairman, Samuel Seeff says the luxury homes market in Cape Town is showing signs of bouncing back across the board with luxury areas reporting significant growth in turnover and record sales in almost every upper end area.

The agency’s average selling price for this year to end of April on the Atlantic Seaboard and Southern Suburbs is up by 40 percent to almost R3.5 million from R2.5 million in 2013.

In these areas, homes have sold for as much as R20.5 million for a villa in Bantry Bay while a luxury apartment measuring 600 square metres in Bantry Bay fetched R42.5 million, and R55.86 million was paid for Clifton villa – both of which are the highest prices achieved this year.

At the V&A Waterfront, a 255 square metre apartment in Palgrave that overlooks the One & Only sold for just under R24 million (incl. VAT), one of the highest prices ever paid for an apartment in this area.

In the Southern Suburbs, a Constantia home was sold for R17 million and in Bishopscourt up to R20 million and R24 million has been achieved for homes in Canterbury and Kirstenbosch Drives respectively.

Pam Golding Properties (PGP) reports that the city’s South Peninsula offers numerous examples of high quality homes that have every modern convenience and luxury, with the added benefit of a semi-rural lifestyle, relatively low crime rates and unmatched views.

PGP’s area manager for the South Peninsula, Sandi Gildenhuys says there is a steady trend of families relocating to the South Peninsula in search of a slower-paced, tranquil lifestyle, close to the beach and closer to nature.

Buyers look for luxury homes with spacious grounds from semi-rural equestrian havens like Noordhoek, to charming seaside villages like Kalk Bay and St James.

She points out that luxury homes in this area range from original mining magnates’ homes to modern redevelopments such as The Majestic Village.

In Kalk Bay, it is possible to buy a cliff-side home with views and luxury finishes for up to R10 million.

Noordhoek is an area of choice for many families wanting to make the move to a more rural environment and a family-friendly, healthy outdoor lifestyle.

 

This five bedroom home in Llandudno is selling for R22.5 million through Cape Waterfront Estates. Click here to view.

Here, top-end properties range from a R28 million mansion set on five acres within the prestigious De Goede Hoop Estate, to upmarket gated developments in Belvedere and Noordhaven, where luxury properties can fetch up to R12 million.

For those with an interest in sailing or with links to the navy, Simon’s Town is a particularly popular choice with top homes priced from R7 million and up to R34 million in some cases.

Wealthy property buyers

According to the report, real estate is unique among asset classes and investors see real estate as far more than bricks and mortar, but rather a dynamic asset class that combines capital appreciation with significant income potential.

Writing in the report, Asoka Wöhrmann, Deutsche Asset & Wealth Management’s co-chief investment officer, believes that property is moving into the investment world’s mainstream.

“People are looking for stable investments and real estate looks good from a total return perspective.”

Wöhrmann credits recent under-performance in fixed income markets with the move of real estate to centre stage: “Equities are performing well, but people are still cautious, and fixed income does not look as compelling any more.

Real estate is looking far better from a volatility and risk reward perspective.”

Furthermore, the report notes that for many UHNWIs property is more than an asset class - it is a livelihood.

Real estate is the fourth most common industry sector amongst UHNWIs, according to the Wealth-X and UBS World Ultra Report 2013.

For example, Carlos Arrizurieta, managing director in Deutsche Asset & Wealth Management’sFlorida office, reveals that clients have as much as 75 percent of their investment portfolio dedicated to direct real estate.

“My clients always see opportunities in real estate, either buying or selling.”

He points out that the only difference he has noticed between today and pre-crisis is that today people are far more likely to stick with what they know. – Denise Mhlanga