With almost R2 billion investment in the city centre confirmed in the past three months, economists say Cape Town is heading for its next property boom – this time driven by the residential market.
Rob Kane, of the Central City Improvement District (CCID), said this amount was probably a “conservative” estimate, as many developers had yet to release their investment figures.
Speaking at yesterday’s business briefing by the CCID, Kane said the demand for residential properties had “significantly outstripped supply” in the central city.
“Together we have laid a solid foundation over the past decade-and-a-half, and now investors are voting for the CBD with their rands and developments are rising from this foundation.”
He said there had been a surge in acquisitions in recent months, especially from developers wanting to refurbish existing buildings.
Francois Viruly, an independent property economist and associate professor at UCT, said Cape Town was headed for its next property boom. The city’s property market experienced an “up” cycle every 20 years, and each “boom” was bigger than the previous cycle.
Just a year ago, the CCID’s State of Cape Town Central Report revealed that in addition to the R24bn that had been invested in the city centre, there was another R3.4bn in the pipeline either with developments already under construction or planned to come online in the next five years.
Kane said the four confirmed developments in the past 12 weeks would push this investment tally up by a further R1.95bn.
The developments include:
* R70m upgrade by the Department of Public Works to the Master of the High Court building in Albertus Street.
* The Sentinel, a R200m residential development on the corner of Loop and Leeuwen streets.
* Tsogo Sun’s development of two hotels on the old Tulip Hotel site to the value of R680m.
* Transformation of the old Triangle House in Riebeek Street with a R1bn residential development by Signatura and the Radisson.
Carola Koblitz, the CCID’s communications manager, said the growing demand for inner city living was part of an international trend where people wanted to move back to the traditional city centre. Residents wanted to live closer to their work, and to spend less time in traffic. The burgeoning residential population has also had a knock-on effect on the retail sector, said Koblitz.
Many families living in the city centre have indicated that deli restaurants and retail options with longer opening hours would be a boon.
But while the appeal of inner city living has seen an estimated 6 000 people already move into the CBD, Viruly cautioned that mounting operating costs because of escalating electricity and rates tariffs could become a constraint.
Viruly said the residential demand, coupled with improved public transport, would be “game changers” for the inner city’s property market.
“The type of demand is shifting. The young professionals who are moving to the inner city are almost the upper end of the student market,” he said.
According to the CCID’s 2014 residential survey, an increasing number of families had opted for downtown living. Almost a third of respondents had children. Most residents surveyed were between 25 and 30, but the age was fairly evenly spread with 22 percent in the 35-44 age group and 15 percent of residents between the ages of 45 and 54. Most of the respondents indicated that they expected to spend at least four years in the city, suggesting that inner city living was no longer a transient option. The average size of a city flat was 80m2, and the average sale price about R1.5m. “People are paying good money to live small,” said Viruly.
Kane said the city would see more of the hotel/residential development, where owners would have access to the full suite of hotel services. The Radisson/Signatura development of the old Triangle House building was an example of this growing trend.