These are the best areas in Cape Town to invest in property

In recent years, the Western Cape region has significantly outperformed the rest of South Africa when it comes to the strength of its housing market and average house price growth.

And the City of Cape Town Metro has been a key driver of the region’s overall house price growth, notes FNB.

But where has the strongest house price growth been within the City of Cape Town? Using Deeds Office Data, the financial services group’s new set of City of Cape Town Sub-Regional House Price Indices point to top performance generally being near to Table Mountain.

In the fourth quarter of 2016, the City of Cape Town’s estimated average house price growth rate remained in double-digit territory to the tune of 13.2% year-on-year. On a quarter-on-quarter basis, the rate was 3%.

This year-on-year price growth rate represents a slight slowing from a 10-year high of 13.4% recorded in the second quarter of 2016.

The FNB City of Cape Town Sub-Regional House Price Indices estimate the strongest year—on-year house price growth to have taken place on the Atlantic Seaboard, which stretches from Green Point through Clifton and all the way to Hout Bay, and has for many years already been the priciest part of Cape Town.

The Western Seaboard House Price Index grew by a massive 22.9% year-on-year in the fourth quarter of 2016, and at that stage was still on an accelerating growth path.

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Not far behind was the City Bowl region, with a fourth quarter year-on-year house price growth rate of 20.1%. In 3rd place was what we call the “City Near Eastern Suburbs”, which includes the likes of Woodstock and Salt River, and stretches east as far as Pinelands. This index showed 15.8% year-on-year growth.

The fourth strongest average house price growth rate was in the area labeled “Southern Peninsula”, which includes Fishoek, Kommetjie and Simons Town. It grew by 14.7% year-on-year, FNB said.

The key Southern Suburbs region has seen some slowing in its average house price growth to 11.6%, thus is no longer one of the strongest growth regions, FNB said.

Further away from the Cape Peninsula’s mountainous areas, growth there has been a little slower, but still impressive when compared nationally.

“One region that has become more popular in recent years as a perhaps more affordable (or less in-affordable) commuter region is Blouberg-Milnerton-Melkbosstrand, and its year-on-year house price inflation was still a respectable 12.5%,” said household and property sector strategist at FNB Home Loans, John Loos.

 

A look at the longer term big picture reveals a similar pattern, FNB said. The bank calculated a 5-year cumulative house price growth rate by sub-region, over the period first quarter 2012 to fourth quarter 2016.

It noted that over this period, all five of the top performing sub-regions were the ones closest to the Cape Peninsula’s mountainous areas.

Leading the pack was the Western Seaboard, with estimated cumulative price growth of 104.4% over the period, followed by the City Bowl with 89.9%, City Near Eastern Suburbs with 72.7%, Southern Suburbs with 63.6%, and Southern Peninsula with 61.7%.

Outside of those five, the next best performer was Blouberg-Milnerton-Melkbosstrand regions with cumulative price growth of 53%.

So why have the already-most expensive suburbs in Cape Town shown the strongest house price growth even off their high base?

According to Loos, the upmarket City Bowl and Western Seaboard have natural beauty and outdoor lifestyle, facilitated by the recreational potential of Table Mountain and the other mountainous areas, and by the sea.

“The major upgrade to the CBD (Central Business District) over the years, and the addition of man-made attractions such as the V&A Waterfront, have added greatly to the City Bowl and surrounding areas having become fashionable for the affluent.”

FNB further pointed out that many wealthy residential buyers come from inland regions such as Gauteng, while the City Bowl and Western Seaboard are able to attract a greater percentage of foreign buyers too, relative to the rest of Cape Town and relative to other SA cities.

“On the supply-side, Table Mountain creates a major land restriction for new property development. Then add to this Cape Town’s growing traffic congestion challenge, and the fact that some of the city’s prime business and employment nodes, most notably the CBD (Central Business District) and Claremont, are in close proximity to the mountain,” Loos said.

Access to especially the CBD is limited by the topography, and as time goes by the city’s inhabitants increasingly plan their life, including where they live, around traffic congestion.

“This should imply a longer term shift in a portion of residential demand towards areas closer in proximity to the Cape Peninsula, and we believe it has,” the property analyst said.

 


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These are the best areas in Cape Town to invest in property