Brendan Miller, CEO at Lew Geffen Sotheby’s International Realty, Atlantic Seaboard, said the growing demand shows no sign of abating after a record year in 2014 when around 530 apartments were sold to the value of R856 million.
“The CBD apartment market last peaked during 2007 with 463 sales to the value of R730 million,” he said.
“This equates to a very accessible average apartment price of R1,6 million at an affordable R20 160 per/m²,” said Miller. “We expect the average price per square metre in the CBD to increase quite dramatically towards the end of next year when several new developments in planning get to the transfer phase.”
“At mid-market level, almost 100 properties priced between R2,5 million and R5 million sold to the value of R313 million and at the upper end of the market 13 sales in the R5 million to R10 million price band changed hands, with one property at 15 on Orange selling for R13,13m,” he said.
“The exponential growth in the CBD residential market has been spurred by several key factors,” said Miller. “Investor confidence in the growth trajectory of Cape Town’s CBD has inspired a major renewal of the city centre as well as new commercial and residential development, and many commuters are simply no longer prepared to waste time in traffic – even if this means cutting back on living space and sacrificing ‘luxuries’ such as gardens.”
According to the Cape Town Central City Improvement District’s State of the Central City Report 2014, the overall nominal value of all property in the CBD in the 2007/2008 financial year was R5,641 billion. In the 2014/2015 financial year, the value had more than quadrupled to R23,724 billion.
“This shows just how confident investors are in the future of Cape Town’s CBD, both as a commercial and as a residential centre,” says Miller, who estimates that the residential population has grown to more than 6 000 inhabitants.
“The average nominal percentage return on investment over four years as measured in 2015 is a solid 19% with buildings such as The Adderley realising 21% over five years, Mutual Heights at 23% over four years, Mandela Rhodes Place at 17% over seven years and Cartwright’s Corner reflecting 13% over four years.
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“More and more Capetonians are beginning to follow the global trend of trading in their suburban homes for the convenience of city living and we are seeing that correctly priced apartments are, almost without exception, snapped up within four to six weeks of being listed,” said Miller.
“This certainly bodes well for investors looking at entering the CBD residential market as there are still many upgrades and developments in the pipeline, which will increase the demand for accommodation as well as push up the value,” said Lew Geffen, chairperson of Lew Geffen Sotheby’s International Realty.