I N V E S T
&
d e v e l O P
A cautionary tale
Interestingly though, things are changing and the latest Cape Town
sub-regional house price data from FNB shows that price growth turned
negative in the City Bowl, Southern Suburbs and Eastern Suburbs (such
as Salt River and Woodstock), along with the Atlantic Seaboard, in the
first quarter of 2019. Owners have also been feeling the pinch a bit with
rentals, as they’re not able to simply apply the double-digit increases
they could a year or two ago.
There’s also been an over-saturation of the Airbnb market, forcing
many investors to lower their nightly rates, which is impacting on initial
calculations. Also concerning (for property investors) is the potential
impact of the newly published Tourism Amendment Bill. This bill
stipulates that short-term home rentals will fall under the Tourism Act,
which empowers the tourism minister to lay down ‘thresholds’ for
Airbnb in South Africa. This could include limits on how many nights
guests are allowed to stay over, or how much income an Airbnb host may
earn, and even a determination of zones in which Airbnbs are allowed.
This won’t just affect Cape Town. Any neighbourhoods that currently
cater for the Airbnb market could potentially take a knock. Think of the
number of business people using short-term rentals in areas such as
Sandton and Rosebank. This could change significantly going forward.
An investment case – how do things compare?
The rental market is not that much better in Cape Town (in the specific
areas mentioned previously), so you should do some solid research.
R
Property growth overall in the Western Cape, according to Lightstone
Property, is still the highest at an average of 5.4% per year compared to
Gauteng at 2.3%. But it’s hard to justify investing more than double to
simply gain an additional 3.1% growth. The better growth does clearly
mean a better investment, but it’s a matter of affordability, and whether
you are willing to place such a high amount into a single property.
Looking at similar new developments in Cape Town and Joburg it seems
that you’ll definitely get more bang for your buck in Joburg, but this
does depend on where exactly you’re looking. Despite the current
price data figures and the concerns around short-term rentals, Cape
Town properties are still priced high and are being snapped up quickly.
A newly built single-bedroom unit in De Waterkant will set you back
over R3 million, while a similar apartment in Rosebank (Johannesburg)
is around the R2.5 million mark. The difference becomes even more
apparent as you look at larger apartments – a three-bedroom apartment
in Sandton costs between R3 million and R5 million, while a similar-sized
apartment on the Cape Town Foreshore would go for anything between
R9 million and R15 million.