R24bn investment for CBD
INVESTMENT in central Cape Town reached R24 billion in the 2014/15 financial year, while a further R9bn is expected for residential and commercial developments in the CBD.
This is contained in the Central City Improvement District’s (CCID) State of Cape Town report released today.
CCID researcher Andrew Flemming said R9bn would be spent on developments like the new Christiaan Barnard Hospital on the Foreshore and the new hotel, which would replace the recently demolished Tulip Hotel in Bree Street.
He said the R9bn investment would hopefully encourage developers to capitalise on a growing inner-city residential property market.
Property generated more than R254 million in municipal rates last year, according to the report. In 2014 alone, residential sales of 191 units amounted to R296m.
Flemming said the millions generated from property was largely thanks to the recent influx in demand for residential property in central Cape Town. “People prefer to live close to where they work and enjoy the nightlife convenience of going to a restaurant after work,” he said.
The spike in demand for CBD residential property is accompanied by a new wave of residential development of 3 500 units. But these units far outstrip what can be supplied.
The report disclosed that less than 90 percent of more than 1million square metres of CBD office space was utilised.
Flemming said vacant office space could be redeveloped for residential purposes.
Seeff ’s Atlantic Seaboard and City Bowl managing director, Ian Slot, hailed the residential boom in the CBD as the story of successful inner-city regeneration.
“It took vision a few years ago for investors to redevelop older buildings and after an initial slow start between 2007 and 2008, the last two years have literally seen apartments fly off the shelf,” he said.
Pam Golding Atlantic Seaboard area manager Basil Moraitis said there had been explosive sales growth in the number of units and values over the last three years, with more than 5 000 people now calling the CBD area home.
“This represents a growth of over 300 percent in residential numbers since 2001 and is set to increase considerably over the next three to five years as a result of the number of residential conversions of inner-city buildings under way,” he said.
Three years ago, Moraitis said there were 132 apartment sales to the value of R145m at an average price of R1.09m. In 2014, there were more than 226 apartment sales to the value of just over R400m at an average price of R1.77m.
This showed that the spike in demand for property in the CBD area had caused prices to double since 2012.
Moraitis said the cost of property was determined by various factors, including the desirability of the property type, current demand versus stock availability, and the cost of bringing new units to the market.
“If this market is flooded by the release of new units which the market is unable to absorb, then there is the possibility that growth in price escalation may slow. However, this is unlikely as there is a critical shortage of stock in this market due to the lack of new development coming to market after the credit crunch of 2007.
“We also have hundreds of buyers registered to buy apartments in the city centre who are unable to find suitable properties, and we thus remain confident that this market will be able to take up hundreds of new residential units, which are in the planning stages at the moment, without saturating the demand in the city at all,” said Moraitis.