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Monday Dec 15, 2014

Steep rise in the price of central Cape Town properties

Residential property prices in Cape Town's central city have risen fairly steeply this year, with around 190 sales generating more than R310 million for sellers in a far more vigorous investment market.

From January to November last year 165 properties worth around R233m changed hands in a slightly slower market.

Last year the average sale price of residences in the CBD was R1.415m, according to Western Cape Estate Agents Institute property sales aggregation website Propstats.

"This year the average price has risen to R1.664m, showing a healthy return on investment for buyers who saw the potential in the central city's vibrant residential opportunities even when there was previously a surplus of stock," says Lew Geffen, the chairman of Lew Geffen Sotheby's International Realty.

The latest figures provided by Cape Town's Central City Improvement District (CCID) show that the value of property in the CBD increased overall from more than R6.127 billion in the 2005/06 financial year to R23.692bn in the 2013/14 financial year.

The CCID supports Geffen in its view that the strong recovery of the residential sector is evidenced by sales having doubled from a total of R115m in 2011 to R249m for the whole of 2013.

"The fact is that we haven't seen any large-scale residential developments in the CBD for several years now, so there is huge demand for the property that is available," says Geffen.

"This is clearly illustrated by the fact that a third of properties recorded as sold in October were on the market for less than two weeks, with correctly priced properties moving particularly quickly."

Properties are also increasingly selling at precisely, or very close to, their listing prices.

"There's no doubt that we are in a sellers' market, where demand outstrips supply, particularly in the under R1.5m price range in the city centre. One-bedroom units for under R1m are now the exception rather than the rule, and they can command as much as R2m. This is good news for property owners who wish to sell in the current buoyant market."

The most expensive sectional title sold recently in the CBD, according to Propstats, was a three-bedroom apartment with 3.5 bathrooms at a sale price of R10m. In the previous year, the highest priced sale was a five-year old two-bedroom apartment that was sold for R4.19m.

But Lew Geffen Sotheby's International Realty agent Jayson Sprawson says he's marketing and selling several apartments in the R4m to R10m bracket, which is becoming commonplace in the area.

At the same time, foreign interest in the CBD has probably been at its highest point since 2007, says Sprawson, who has sold several properties to foreign buyers this year.

Sprawson describes the buyers of properties in the CBD as "quite an interesting mix", with a wide variety of people drawn to the area to invest or to live.

He says: "Most buyers are still middle income earners moving from South Africa's other major cities such as Johannesburg, Durban or Bloemfontein or buying an investment for their children to live in while studying in Cape Town. There seems to be a definite migration of South Africans to Cape Town at the moment, which is really pushing the demand. Although SA buyers from outside Cape Town are shocked at the soaring prices of CBD prices, they are still investing in fear of missing the proverbial boat.

"It's not just trendy up-andcomings who you'd imagine would enjoy the buzz of living in the heart of a city. There are families with school-going children, professionals in their 30s and 40s and - according to the CCID's recent residential survey - a fair sprinkling of senior citizens as well," he says.

"Many central city flats are also bought as investment properties to rent to long-term tenants, or increasingly for short lets to executives visiting Cape Town for work who choose not to stay in hotels. The shortterm letting market is an investment model that cannot be ignored, with the CBD showing impressive occupancy levels all year round between conference visitors, travelling executives, sports event participants and of course holidaymakers.

"Many of the Atlantic seaboard sectional title schemes don't allow short term letting which again makes the CBD, De Waterkant and Foreshore developments appealing"

CBD residential properties are generally fairly new conversions or builds and are therefore characterised by a high standard of modern finishes, which commands a premium on the rental market.

Sprawson believes the demand for CBD properties will remain high and prices will continue to rise because there is unlikely to be a massive surge in residential property development in the short term.

"We'll see a handful of buildings being converted to mixed use with a residential element over the next couple of years. But demand will still outstrip the rate at which developers will be able to supply new properties, which is frustrating for us as agents as we have waiting lists of buyers desperately wanting to get in on the investment action," says Sprawson.

Geffen says the high purchase rate of properties in the area - with most achieving at least 95 percent of their listing prices - is entirely driven by the growing desirability of the area as a residential zone, because many people want to live within walking distance of work, and also like the idea of 24-hour city life on their doorsteps.

Weekend Argus (Sunday Edition)

 
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