Real Estate Investor Magazine South Africa March/April 2019 | Page 15

CAPE TOWN
H
ousing markets across the globe, influenced by sev-
eral political-economic factors, are experiencing a
slowdown in house prices. Closer to home, the out-
look for 2019 is somewhat brighter after a tough 2018. ‘Sweet
spots’ within the residential market are certainly prevalent and
buyers still perceive property ownership as the cornerstone of
wealth creation. These are just some of the reasons to be cau-
tiously optimistic. 
According to Lightstone’s forecast, GDP will grow between
0.75% and 1.5%, and CPI will range between 4.0% - 5.5%
for 2019. Lightstone’s data scientists modelled three different
scenarios for house price growth for the year. In the high road
scenario, Lightstone predicts that house prices will grow by
4,5%. This drops to 3% in the mid-road scenario, and 2% in
the low road scenario.
What’s more, Paul-Roux de Kock, Analytics Director at
Lightstone, predicts a positive economic turnaround post-
election, which is likely to stimulate the property market.
However, if the coming general election goes smoothly, it
will bring confidence and certainty back to the market and the
economy, and hopefully be the catalyst that creates positive
strides in the right direction. This is in line with de Kock’s
prediction that there remains the potential to end the year
breaking through the forecasted percentage for the high road
scenario altogether.
Cape Town property is a sure thing
Despite Eskom’s woes, land repatriation debates and Zuptagate
headlines to depress even the most optimistic of investor, Cape
Town consistently bucks the lackluster property price trends
witnessed by the rest of the country. Knight Frank’s 2018
Wealth Report ranks the city’s property market as the world’s
second-top-performing market, and this is reflected in the
high prices for asked- and received-for property in the Mother
City, with the Atlantic Seaboard and City Bowl showing a
combined growth of a whopping 111% for the past five years.
The city centre, too, is growing in popularity.
    Inflation has been kept under control, with consumer
debt-to-income ratios dropping from highs of 87% in 2008 to
72% in 2017. Interest rates over the past few years have been
low, which has sustained the property market at a steady pace,
and even though there was a rise in 2017, it hasn’t affected the
property market in a significant way.
 Major developments also boost the entire vicinity in which
their property is located – creating other opportunities for
investors. ‘With our extensive property experience, the value
of the assets we manage is optimised by improving the asset
itself as well as the surrounding area, resulting in property
values increasing and seeing a positive return on investments,’
Investicore’s Dawie Swart, CEO, says.
The Pinnacle Building, previously home to Cape Town
Tourism, undergoing redevelopment by Investicore and
is evoking significant interest from both residential and
commercial investors, according to Swart. 
  The Urban Artisan residential building and 97 Durham
Avenue, both in Salt River, are perfect examples of successful
enterprises developed by Investicore. The success of these
projects is not only reflected in the profitable income from
these premises, but most importantly how they turned this
once-derelict industrial area into a sought-after address. 
Cape Town’s tourism industry is resilient
Despite gloomy tourism figures, high levels of interest
from international and local operators point towards robust
development from 2020 onwards.
Despite South Africa’s recent technical recession and a
drought that crippled many areas of Western Cape business,
foreign tourism rose by 2.4% in 2017, building on a 12.8%
increase in 2016. Domestic travel showed the greatest increase
since 2014, rising 4.2% in 2017 – well above the gains of less
than 2% in 2015/16.  
‘The odds have been against us, what with a constrained
economy, a drought, tourism visa issues and questions around
electricity supply,’ says Wayne Troughton, CEO of HTI
Consulting, ‘yet despite this we’ve never before witnessed the
levels of interest we’re seeing right now from international and
local operators wanting to expand or launch into, specifically,
Cape Town, with the CBD being high in demand.’
Cape Town remains the country’s top tourist destination.
The city was named the World’s Leading Festival and Events
Destination at the 2018 World Travel Awards in Lisbon,
and the International Congress and Convention Association
ranked the Mother City as the best business tourism city in
Africa.
Demand for hotels in Cape Town has grown exponentially
since 2012. Between 2012 and 2017, the occupancy and
average daily rate (of the Cape Town market as a whole
grew at a compounded annual growth rate of 3% and 10.7%
respectively. 
‘Cape Town’s current hotel offering covers a broad variety
of markets, including corporate, government, leisure and
conferencing/ groups, so we’re trying to encourage developers
to cater for several of these groupings as a means of limiting
their risk,’ says Troughton. ‘Of course, there are great cost
savings for operators already established in the city, as you can
synergise certain functions, such as the outsourcing of laundry
or staff functions such as financial controller, between your
various properties.’
Although the Waterfront remains the number-one area
of demand for development, the Foreshore is witnessing
unprecedented interest. The expansion of the Cape Town
International Convention Centre, along with the opening of
the new Netcare Christiaan Barnard Memorial Hospital, has
triggered further developments: The Onyx, a new apartment-
style residential hotel, a 200-room Cape Town Marriott Hotel
Foreshore and a 150-room Residence Inn by Marriott Cape
Town Foreshore, both of which will be built at the Harbour
Arch. 
Interest from private developers is growing too, notably
with the soon-to-open Gorgeous George, a 32-room luxury
boutique hotel in two refurbished heritage buildings on St
George’s Mall. With precincts similar to the Foreshore, such
as upper Adderley Street/Wale Street, Bree Street, and the
East City Precinct/the Fringe/lower District Six, witnessing
massive urban renewal, Cape Town has begun to offer a
totally new, unconventional inner-city tourism experience –
something different from the typical Waterfront-Camps Bay-
Cape Winelands offering. 
Managing Director of Gorgeous George Wessel Botes
says: ‘Experience has shown that once redundant inner-city
buildings are brought back to their former glory and turned
into stunning design-led hotels, much like what ACE
Hotels are doing in London’s Shoreditch or SOHO House
in Manhattan’s Meat Packing District, those areas begin to
attract a whole new tourism market, and one that’s far more
appreciative of design, culture, art, fashion, architecture and so
on. Cape Town’s Strand Street, St George’s Mall and the East
City Precinct offer that.’ 
First-time buyers in Cape Town
‘Top suburbs for first-time buyers in Cape Town are found in
the Northern suburbs, particularly Brackenfell, Kraaifontein
and Kuils River.  Property on the Western Seaboard remains
relatively affordable with new suburbs like Sunningdale and
SA Real Estate Investor Magazine MARCH/APRIL 2019
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