Weekend Argus (Saturday Edition)
Putting central prices in perspective
Cape Town’s CBD is not as expensive as some buyers think it is, says CCID’s chairman
DESIRABILITY of location sells property, and the more desirable an area, the more its cost a square metre will rise.
It’s the golden mean of successful investment for any property owner and of course property developers, irrespective of what end of the market they enter. In terms of residential investment, it means preferably getting in while the curve – and price – is low, and riding the wave.
This wave is tracked annually in The State of Cape Town Central City Report, an investment guide to the city’s traditional CBD published by the Cape Town Central City Improvement District (CCID). Its latest publication, 2015 – A year in review (launched this week), is an account of the area’s economic performance over the past year, with a strong focus on its rising residential market.
The report notes that, two years back in 2013, the average price in the CBD across the 163 units sold that year, was R17 500/m2. During the course of last year, that average had outstrips supply. Plus, we can see from the sales listings of properties being sold, that these higher end units are definitely being snapped up as they come on to the market.
“But the second reason that averages in the CBD are reported as much higher than they actually are is that they regularly get added to those prices being achieved in the immediately neighbouring areas which are not within the boundaries of the actual CBD – and then averaged out at that level. Certainly, if you add the CBD to the V&A Waterfront ( where averages are much higher) or even Green Point or the rest of the City Bowl, and then you state in a press release that these averages are the going rate in ‘the CBD’, then obviously you are going to create the impression that this is the going rate in the CBD proper.”
Says CCID communications manager and author of the 2015 publication, Carola Koblitz: “Because the Central City Report focuses very specifically on the actual CBD boundaries as defined by the special ratings area bylaw (the footprint in which the CCID operates), this year’s report therefore includes a mapped analysis of other rates (a m being achieved in sectional title flat complexes in areas immediately bordering the CBD.
“There are almost no freestanding houses in the actual Cape Town CBD. The residential community here lives in flats, so we felt it was important for the map to compare ‘apples to apples’.
“In terms of the neighbouring areas that have been included in the map, these are suburbs that are often poetically referred to as being part of the ‘downtown’, because the CBD has become a desirable lifestyle option. And, though they lie in close proximity to our area – and we of course welcome the vibrancy they bring to the overall region as neighbours – they are not actually in the CBD.
“We believe it’s important to acknowledge that there is a difference in pricing between the different geographically demarcated areas. To this end, we’ve mapped not only the areas themselves but also the distances from their closest boundaries to the epicentre of the CBD – deemed to be at the intersec- tion of Adderley and Shortmarket streets – to show their overall proximity to the CBD.”
Three of the neighbourhoods that lie closest to the CBD’s centre are the bordering suburbs of Zonnebloem, District Six and Woodstock, but where property prices last year averaged out at the much lower rate of R16 210/m says Kane.
“It’s very interesting to us that the CBD average is never added to the average of those areas. And yet, these lie within the same distance from the centre of the downtown as De Waterkant or the V&A. All residents who live so close to the CBD – many of whom work or study here – are extremely critical to the vibrancy of the CBD. We hope that they not only come here to work, but to spend their leisure or retail hours here as well.”
It is also in this south-easterly direction that the most opportunity lies for more affordable housing opportunities, as this is where large tracts of government land are to be found, says Kane.
“The CCID would really welcome all levels of government that own these parcels to look towards developing them to bring more people from across the entire economic spectrum much closer to the heart of the CBD – particularly those who currently live far from their places of work or study and spend excessive amounts of their income on public transport.”
However, says Kane, there is no doubt that prices of developments traded on the open market will continue to grow in the CBD and the surrounding areas.
“In 2014, the average price rose to R19 227.85/m in the CBD – that’s just under 10 percent growth in a year. From 2014 to last year, we’ve seen a growth rate of 27 percent year-onyear, and we have no doubt it will continue to grow by at least a similar percentage over the course of this year.
“If there are buyers who are willing and able to pay a premium to be part of the downtown lifestyle, then the market will continue to supply these at the going rate. The key therefore to introducing more affordable options really lies in the hands of authorities that hold government land.”