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Monday Apr 24, 2017

Cape Town city centre experiences population explosion

The face of central Cape Town is changing rapidly as new investment in residential development increases the number of people who call the CBD home.

New residential developments, such as Tuynhuys in Keerom Street that was announced this week and due for completion in August next year, are in response to the high demand for city living.

This week, the Central City Improvement District's (CCID) latest State of Cape Town Central City Report showed a record 228 residential properties were sold and transferred in the central city last year. This is the highest in the past five years.

The report notes that despite the numbers of properties sold, a year-on-year comparison confirmed the central city continues to show a steady rise in both price and interest in a downtown lifestyle.

In one decade, the residential population has exploded by just under 1 000% from 750 to to 7 000 residents. And this figure is set to grow with other residential developments planned, such as the Keerom Street development, Tuynhuys, by Robert Silke and Partners and Willbridge Property Company, announced this week.

The City of Cape Town's plans to create a more diverse socio-economic demographic in years to come through its Foreshore Freeway Precinct project that will include an affordable housing component, is likely to attract more residents.

"By 2019, the number of residents could grow to anywhere from a conservative 8 500 up to 12 000," says CCID chairperson Rob Kane.

He says the report is intended to engage investor interest and give property owners the reassurance they have made a wise investment.

Analysis of all units sold last year reveals an average selling price of R2.337 million (against R2.031m in 2015) and an average rand per m² of R33 921 (versus R24 483 in 2015).

"This is a significant increase of 15.06% in average unit selling price from 2015 to 2016, but we have also seen a steadying of the market as the year-on-year increase from 2014 to 2015 was a substantial 30.86%," says Kane.

As a stand-alone statistic, the 2014/ 15 percentage rise could be somewhat deceptive, though.

"Before 2014, many units had been on the market for some time, but when interest in residential property in the CBD was just starting to revive, these units were sold off at a relatively low price base. With the increase in appetite for downtown apartments since then, demand has risen along with a drop in supply. Naturally these market dynamics result in rising prices."

Prior to this earlier period, values in the central city had stagnated for a number years, following the original residential property development boom in the mid-2000s which saw more than 3 000 apartments created largely from under-utilised and re-purposed commercial buildings, which drew rapid uptake from investors hoping to leverage short-term and profitable turnarounds.

But with the local property market having been hit by the financial crisis felt globally in the late 2000s, it has only really been since 2014 that downtown "pioneers" looking for an urban lifestyle have begun to see the CBD as a true live/ work/play destination and a long-term investment.

Kane has a word of caution: "Developers - and indeed those looking to sell properties - cannot expect to achieve unrealistic year- on- year increases beyond what the market can accommodate, particularly as South Africa faces an uncertain economic future overall with possible interest rate hikes.

"We do, however, believe that well-priced units will continue to steadily rise in value year-on-year and well above the average across Cape Town's overall property market, ensuring that residential property in the central city remains a sound recession-proof investment," he says.

CCID communications manager Carola Koblitz and editor of the report says: "For the central city to succeed as a strong residential node, you want steady year-on-year increases in value, with people buying apartments to live in themselves, and this has certainly been the recent trend.

"It has come to our attention, for example, that increasing numbers of professionals in areas such as the southern suburbs are selling their homes to take up a downtown lifestyle, which enables them to be closer to their places of work and avoid traffic congestion."

Kane says the central city is eagerly awaiting the outcome of the City's Foreshore Freeway Precinct project that will enable a public-private partnership, which will hopefully see affordable housing being built in the CBD to bring even more commuters closer to work.

Together with the units that existed before last year, it is estimated that the total number of residential units now within the CCID's central city footprint amount to about 3 800.

  • Why being 'in town' is all the rage

    Carola Koblitz, editor of the Central City Improvement District's latest State of Cape Town Central City Report and a central city resident herself, lists the five top reasons the central city is attractive as a place to live:

    1 When the revival of interest in CBD property began around 2013/2014, values had on the whole fallen to below market value and the first people to return were able to buy in at very low prices. Since then, demand has been greater than supply, so investment values continue to increase.

    2 The CBD really geared up for the 2010 World Cup in terms of infrastructure - such as the MyCiTi system, the pedestrian prioritisation of many roads and the revitalisation of public spaces such as Greenmarket Square. This makes living in town far more accessible and attractive.

    3 The retail mix has improved dramatically - there is a range from departmental chain stores to bespoke boutiques offering around 627 retail outlets.

    4 The night-time economy and footprint is expanding beyond just the club scene for young people in Long Street. Bree Street has a new lease of life, with many venues catering for the after-work and early evening market.

    5 The entire CBD is becoming more user-friendly outside business hours. Some shops have extended opening hours, residents have rediscovered family-friendly spaces such as The Company's Garden and events from First Thursdays to Museum Night to Open Streets are bringing people back.

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