Capetonians are bracing for the onset of day zero \u2013 the day the City turns off the taps and residents will have to collect their 25 litre water ration at one of 200 public distribution points. Should this day arrive, the social and economic impact is predicted to be catastrophic.<\/p>\n
Could it also be the final straw that breaks the back of Cape Town\u2019s famously buoyant property market?<\/p>\n
\u201cSo far, we\u2019ve seen little evidence of the water crisis affecting Cape Town property,\u201d said Tony Clarke, MD of the Rawson Property Group. \u201cBuyers are certainly more water-aware, and looking for homes that offer greater water security, but they haven\u2019t been deterred from investing in our city as yet.\u201d<\/p>\n
While the market remains strong for now, Clarke admits it would be na\u00efve to assume things will continue as normal come day zero. He does not, however, believe the situation will be as dire as many predict.<\/p>\n
\u201cDifferent areas of the property market will be affected in different ways,\u201d he said, \u201clargely due to the different effects the crisis will have on the province\u2019s various demographics.<\/p>\n
\u201cIf we take the middle- to upper-end of the market, for example, I do think sales will start to slow. Semigration \u2013 a huge driving factor in this segment over the last few years \u2013 is unlikely to continue at the same rate until we resolve our water situation.<\/p>\n
“That means we\u2019re not going to have as many affluent Joburgers and Durbanites driving demand for luxury property, and prices could take a slight knock in the short term.”<\/p>\n
While existing owners are unlikely to be thrilled at that possibility, Clarke believes it could actually have a valuable normalising effect on this end of the market.<\/p>\n
\u201cWe\u2019ve seen double-figure capitalisation in Western Cape property over the last two years,\u201d he said, \u201cand that kind of growth isn\u2019t typically sustainable. Left unchecked, there\u2019s a risk that property values would lose touch with their underlying economic fundamentals, and we\u2019d end up in a bubble situation \u2013 something we definitely want to avoid.\u201d<\/p>\n
Entry level properties may not see the same normalisation effect as their more expensive counterparts, however. In fact, first-time buyers in the Western Cape may face even higher prices thanks to the water crisis.<\/p>\n
\u201cThere are two main factors that could affect the entry-level property market,\u201d said Clarke.<\/p>\n
\u201cThe first is the likely influx of people that we\u2019re going to see coming to Cape Town to look for work as our outlying rural and agricultural areas take strain. That movement would increase the need for affordable rentals, and could trigger increased demand for entry-level homes from buy-to-let investors.<\/p>\n
\u201cThe second factor is the effect the lack of water will have on construction. Far fewer developments are going to be approved by the municipality, which cuts down on the amount of new stock hitting the market. That could increase demand for existing entry-level units and push up prices.\u201d<\/p>\n
Of course, prices mean very little if no-one is buying property. Do Capetonians really have enough confidence in their city to continue making long-term investments?<\/p>\n
\u201cSouth Africans are nothing if not resilient,\u201d said Clarke, \u201cand I think most Capetonians are very positive about sticking it out and making it through this crisis.<\/p>\n
\u201cAffordability could be an issue in the short term, and we could see more activity from investors than homeowners in some parts of the market. In general, however, I think the positive political changes that we\u2019ve seen on the national stage will do a lot to bolster consumer confidence, and if we can get through day zero, Cape Town\u2019s property market will be just fine.\u201d<\/p>\n