City Bowl property still accessible option for smart investors

THERE was a time not so long ago when the entire City Bowl was an affordable area for young professionals and low to mid- income salary earners wanting to get a foot in the property market, offering them a wide choice of property options at very accessible prices.

As recently as 2008, investors could expect to buy an entry level flat in most suburbs for between R600 000 and R800 000 and a three-bedroom house could still be found for around R1.8 million.

However, the sharp increase in property values since the market began to recover again in 2010, largely driven by the steadily growing demand, has bumped up the entry level point considerably, even doubling it in certain suburbs.

This is according to Brendan Miller, Atlantic seaboard chief executive for Lew Geffen Sotheby’s International Realty, who says that Lightstone records show that since the beginning of 2010 the influx of new buyers in the City Bowl areas has caused the annual house sales total of R774 850m (189 sales) to improve by 53 percent to a new all-time record of R1.185 billion (235 sales) during 2013.

This was immediately followed by another record breaking year during 2014 when 217 sales were recorded to the value of R1.21bn.

“Apartments fared equally well with two consecutive backto-back record years in 2013 and 2014 with 2013 recording 817 sales to the value of R1.252bn, followed by 971 transactions in 2014 to an all-time record value of R1.707bn.

“Last year looks set to be a third record year as by the end of the third quarter, 613 sales realised R1.098bn.”

However, Miller cautions that investors should not be put off by this growth spurt as prices do differ from suburb to suburb and, with a little patience, affordable gems do still come on to the market, particularly in Zonnebloem, Gardens and Vredehoek.

Citing Propstats figures, Miller says that last year the average entry level flat price in the entire City Bowl was R1.55m, whereas in Zonnebloem several flats were sold for under R800 000 and in Gardens a couple of bachelor flats still changed hands for around R1.1m.

“The average entry level house price last year was R3.5m for an older two- or three-bedroom house whereas, although scarce, a similar property can be bought in Zonnebloem for under R2m and in Gardens for around R3m.”

Grant Bailey of Lew Geffen Sotheby’s International Realty says that entry prices start to rise as the suburbs begin to slope toward Table Mountain.

“In Vredehoek and Oranjezicht, first time buyers looking at apartments can expect to pay around R1.7m and R1.8m respectively and R2m in Tamboerskloof, whereas starter houses in those areas range between R3.5m and R4m.”

However, even though the entry point may have risen considerably in recent years, Bailey says that the upside of this sturdy growth is that it bodes well for return on investment, particularly with older homes, as a little strategic renovation of an original home in the City Bowl can catapult the value of the property into the next market segment.

“Aside from the City Bowl’s exceptionally convenient location, another major drawcard is the types of properties that are available in the area, especially the Victorian homes which have loads of character and display a care of construction that is often lacking in modern homes.”

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty Property, says that another indication of the market strength in the City Bowl is the diminishing gap between listing and selling prices.

“Although the gap has shrunk more in the low to midmarket segments, across the board the difference has shrunk from 8.7 percent in 2010 to 5.7 percent in 2015 and we’re finding that correctly priced homes are quickly snapped up, sometimes within days of being released.”