British benefit from a buyers’ market in Cape Town
It is a classic buyers’ market in Cape Town with properties taking 19 weeks on average to sell and then with only 15 % of vendors achieving their asking price. This is good news for foreign buyers who account for almost 7% of total sales, by far the highest proportion of sales in any South African city, with the British a prominent force.
In the first quarter of 2011, Cluttons South Africa reports a lengthening in the average time homes spent on the market before selling, from 15 weeks and six days in the fourth quarter of 2010 to 19 weeks and one day. Nevertheless, in Cape Town, the occasional big high-price sale has supported confidence, even through the market’s toughest period. Over 80% of properties in Cape Town sold for over Rand 6m (£550,000) are to cash buyers. City Bowl and Atlantic Seaboard properties have fetched big prices of late. Between June and December last year the average price of apartments in the City Bowl, where 327 apartments were sold last year, jumped 15.2% to R1.53m (£140,000).
The Cluttons South Africa report added that since the bottoming out of the recession in 2009 when market values had dropped in most areas by 12 to 15%, there has been a marked increase in property transactions in the lower end of the market, R1m to R4m (£90,000 to £365,000) and in the upper end where prices are R10m (£900,000) and above. The lower end has benefited from the loosening of banks lending criteria and the upper end records most sales as cash sales. This is particularly true for British buyers, where cash is used or borrowed from UK banks at interest rates far below those currently available in South Africa.
Jacques Ellis, managing director, Cluttons South Africa says: “British buyers can benefit from substantial discounts by shopping around. It is important to look for quality and prime locations”.
Prime areas
The prime areas in Cape Town are the Atlantic Seaboard and the Constantia Valley. The Atlantic Seaboard includes the V&A Waterfront, Green Point, Sea Point, Fresnaye, Bantry Bay, Clifton and Camps Bay. The last four being the most prime and expensive areas. Hot spots in these areas are Upper Green Point and Upper Sea Point. Value can still be had in these areas with many properties being fully renovated or demolished and rebuilt either as single family homes or small blocks of apartments.
In Constantia Valley, the prime areas include Bishops Court, Constantia, Upper Constantia and Steenberg. All of these areas have potential and offer larger homes with excellent views of False Bay. There is a large number of estates around Steenberg that are near the best schools.
For apartments in prime Atlantic Seaboard areas, expect to pay from R25, 000 to R42, 000 per m2 (£2,300 to £3,800) and up to R75, 000 per m2 (£6,800) for super prime. For houses with grounds, expect R20, 000 to R50, 000 per m2 (£1,800 to £4,500). In the Constantia valley, there are very few apartments and house prices are similar to the Atlantic Seaboard. Rentals have remained strong across the board over the past few years during the recession and yields have remained steady with an average of 4% gross.
British buyers
British buyers have been active in the Cape region for over the past 20 years with most purchasers opting for Cape Town and its many areas of the wine district to the north of the city that is approximately a 45 minute drive. Most of the appeal for the British buyer is that English is the most widely spoken language, the over night flights to the city are easy and have just a one hour time difference. Also, compared to popular Mediterranean destinations, prices for similar properties are up to 50% less.
Jacques Ellis, managing director of Cluttons South Africa says: “The British have always been a prominent force in the purchasing of properties in the Cape region. We have recently concluded a number of sales to British buyers in the R5m to R18m range (£450,000 to £1.6m). We also feel that the bottom of the market has been reached and the middle and luxury end of the market offers substantial opportunity for price increases over the next few years.”
The buying process
It is very easy for foreigners to buy in South Africa. There are no restrictions. The property laws are very strong and follow Roman Dutch Law. You may borrow 50% of the purchase price in rand from a local bank; the remainder needs to be brought in. There is no restriction on taking funds out again or profit from a property as long as all the forex rules are followed – these are not complex. There is capital gains tax of 10% on property, quite low compared to other countries
World Cup legacy
Cape Town’s World cup legacy includes an array of new infrastructure including the airport, the central railway station, a new stadium and a new inner city transport service. A new pedestrian network and cycle lanes in the city has made it a friendlier place for visitors. Over 10 billion Rand was spent on getting the city ready for the World Cup. Television coverage around the world showed Cape Town as a highly modern, technologically capable, cutting edge city.
Cape region defined
The Western Cape is one of nine provinces in South Africa. It covers an area of almost 130,000km2 and has a population of about five million. Cape Town, situated below the iconic flat topped Table Mountain, is the capital and other large towns are Stellenbosch and George. Cape Town is on a peninsula where the Indian and Atlantic oceans meet. It has a Mediterranean climate with cool, wet winters and warm dry summers. It is home to the Cape Floral Kingdom which is famous for being home to more plant species than can be found in the entire United Kingdom.
Cluttons South Africa has three offices in Cape Town. For more information, visit cluttons.co.za.
