Number of residential units grows, but buying and renting costs drop
The Cape Town CBD is fast becoming a residential hotspot, with the number of residential units having grown by 450% over the past 20 years. Over the next two years almost 700 more units will be added to the city centre.
Twenty years ago, the city centre was home to 792 residential units. Five years later this number had reached 1 472, Pam Golding Properties’ senior market and research analyst, Sandra Gordan, told guests at this week’s Cape Town Central City Improvement District breakfast.
Demand for homes in the CBD continued to grow and from 2004 to 2008 an additional 2 129 residential units were developed, Gordan said. Today there is a total of 4 215 units, and over the next two years, another 687 apartments in six new developments will be built, taking the number to 4 902 units.
By comparison, the Durban city centre has 5 829 residential sectional title units, Pretoria 3 853, and Joburg only 119. Noting that Cape Town Central City was perhaps not the largest major city centre housing market in South Africa, either in terms of unit sales or total housing stock, Gordan said it nevertheless commanded the highest prices, and by a considerable margin.
Although the number of residential units in the CBD is growing by the year, the CCID’s Carola Koblitz said there had been a drop in the average sales price of these units, from R2.769 million at the end of 2017 to R2.331m as at June 2018. This also indicated a 5.4% decrease in the average rand per square metre from R41 287/m² at the end of 2017 to R39 038/m² as at June 2018.
Also important to note was that the new units coming onto the market and making up the lion’s share of all units transferred are growing significantly smaller year-on-year, Koblitz said.
“Back in 2013, the average size of units transferred was around 82m². By 2016, this had dropped to 71m², and the latest indicators are for units around 60m².”
Of concern, however, is the significant increase in rental units on the market, and this should sound a cautionary call to investment buyers.
“We have 280 units to rent in the CBD, versus 150 in December 2017. We’ve also seen a significant decline in average monthly rentals being asked.”
In December 2017, the average rental for a studio was R12 186, it is now R11 286. A one-bedroom property averaged a rent of R14 747 in December last now and now averages R13 792.
A two-bedroom flat averaged at R24 967 in December 2017 now averages R20 800. A three-bedroom property, at an average of R59 000 a month in December 2017, is now down to R37 278.
Although this is “heartening” for tenants in the Cape Town CBD, investors should be aware of the growing supply, Koblitz said.
“There is obviously quite a bit of choice available and we are assuming there is also a great deal of room for negotiation on behalf of prospective rental tenants.
“We have also seen a huge increase in furnished rental units, which tells us that many of these were quite possibly originally bought for short-term holiday lets and are now being released into the marketplace for longer lets.”
Mix of private and public investment creates downtown success
A successful downtown is a visible indicator of a successful city, and for the past few years the Cape Town CBD has been an asset for the city in its efforts to recruit new businesses and economic sectors, residents, local and foreign visitors, and, of course, to retain everything that already exists.
Although times are tough economically, Rob Kane, chairman of the CCID, says the city centre has about 34 developments either under construction or in the planning stages within the CCID footprint.
He says that with the 13 projects that came on line last year – either opening their doors or completing their upgrades – there is a healthy mix across the public and private sectors.
This is just one measure of what makes a successful downtown.
The 13 projects that came on line during 2017, and which were either new developments, redevelopments, or upgrades, included:
The new CTICC expansion.
Redevelopment of the Strand Concourse
The upgrade of the College of Cape Town and the Master of the High Court.
Cape Town Station.
Iziko Museum and planetarium in the Company’s Garden.
Private sector (commercial development):
Upgrades to 4 Loop Street and Pier Place.
Upgrade to Speaker’s Corner and the entire Church Square surrounds.
Private sector (residential and visitors):
Tsogo Sun’s Cape Sun
Tsogo Sun’s Sunsquare and Stay Easy hotels.
Radisson Blu Hotel & Residence.
The Sentinel residential complex.
“This is a healthy mix of both private and public investment which is vital for the vibrancy and diversity of a downtown,” Kane said.