Cape of good house prices def ies slump
Investors in search of safe haven choose Atlantic seaboard
CAPE Town is the 20th most expensive place in the world to buy property and the most expensive in Africa, according to the Wealth Report produced by global property consultancy firm Knight Frank.
The average price per square metre of property in Cape Town in 2011 was ranked 54th globally and last year it climbed to the 20th spot, with a square metre costing about $6 000 (R55 000).
This does not mean Cape Town has escaped the global property slump, but the city has performed far better than many other parts of the world.
Lanice Steward, managing director of Anne Porter Properties, said the change in Cape Town ’ s position was a sign of the downturn in the international market and not owing to an increase in prices.
According to the report, the average property price increase in 2012 in Cape Town was about 1%, whereas prices rose by 2.4% on average in 2011.
Cape Town has benefited from investors who chose emerging markets for safe havens during the crisis in the eurozone and uncertainty in many financial markets.
“Overall demand for prime residential property, for investment or lifestyle reasons or as a safe-haven asset, remained strong through 2012,” states the report. “In the majority of locations across Asia-Pacific, the Middle East and Africa, this demand helped to push prime prices higher.”
Cities such as Beijing and Shanghai in China, Sao Paulo in Brazil and Dubai were some of those that rose in the ranks.
In Cape Town, the suburbs overlooking the Atlantic from Camps Bay to the V&A Waterfront are among the most sought after on the continent.
Ian Slot, managing director of estate agency Seeff, said the capital growth on Cape Town properties had sustained demand even during downturns.
“During the pre-2008 boom period, Cape Town was achieving average house price growth rates of between 12% and 15%,” Slot said.
“During the period 2009 to 2010, Atlantic seaboard house prices grew by an average of 12.6%. In the last year [2012], and despite the continued economic pressures and downward pressure on property prices, the average house price on the Atlantic seaboard was also up by almost 14% to R9.62-million, compared with R8.4-million in the previous year.”
Homeowners in Nettleton Road, billed as the most expensive street in South Africa, pay rates of up to R100 000 a square metre, Slot said.
In the midst of the recession, the wealthy and investors “have over the past three years bought up property here and have quietly gone about creating homes valued at well over R120million, significantly more than the highest price of R65-million [that was] paid for 34 Nettleton Road in 2010,” Slot said.
“[ We are] currently marketing luxury villas here priced between R49-million and R120million.”
Steward said the Atlantic seaboard offered “an international lifestyle” and the “southern suburbs have always traditionally been attractive for the access to some of South Africa’s top schools”.
For an investor, high rents guarantee a profit.
“Villas in Clifton, Bantry Bay and Fresnaye, for example, achieve anything up to R15 000 a day for a luxury seaside apartment and R60 000 a day for a villa with a penthouse suite right on the ocean’s edge during the peak holiday seasons,” Slot said. “On longer-term contracts of between six months and two years, investors can yield rates that range from R30 000 to R60 000 a month.”
Most South Africans are unable to afford these homes, but foreigners continue to flock to Cape Town.
Steward said about 7% to 8% of property in Cape Town was owned by foreigners — compared with a 3.5% average in the rest of South Africa.
“[ But] the interesting statistic is the increased number of buyers coming from Africa. This has grown from 8.5% [of all foreign owners] in the fourth quarter of 2010 to 22% in the fourth quarter of 2012,” said Steward.
Slot said: “In 2012, about 86 properties — with a total value of just under R550-million — sold to foreign buyers on the Atlantic seaboard. The majority of these properties are bought in cash and therefore contribute to investment inflows into the country.”
Of the 86 properties sold by Slot, 22 were bought by UK nationals, 10 by Germans and seven by Namibians.
A big sale was that of a R42million house to Joachim Niederberger, a German businessman who was a director of the now-dissolved Fortuna Sport Advertising company.
South African Mark Krok, son of skin-lightening cream tycoon Abe, bought a R37.5-million mansion in Clifton.