Property companies have cited the drought, the weak economy and an oversupply of residential properties as the main reasons for a decrease in demand for apartments to rent and more properties staying on the market.
But some agents say the situation did not signal that the lucrative property boom was over, but rather that the sector was seeing a “correction” in prices.
Cape Town’s inner city has seen a flurry of developments, mostly apartments catering for the wealthy.
In the past five years, prices of homes across the city have risen by nearly 80%, making Cape Town’s properties the third most expensive in the world after Shanghai and Vancouver.
In 2016 a property in Bantry bay sold for R290 million.
But many have cautioned it is “business unusual” in the residential property sector, with some holding on to properties and adopting a “wait and see” attitude, while in the rental market tenants had the advantage of negotiating for an “affordable” price.
On one property website, there were about 410 properties available for rent in the CBD with prices ranging from R9 500 to R27 000.
David Rebe, chief executive officer for Sandak-Lewin Trust, confirmed that the company, “like many others” which offered letting services for properties in the CBD, was experiencing a slow-down in the market and this had resulted in declining rentals, increasing vacancy rates and properties taking longer to rent.
He said the main drivers of the slow-down were an oversupply of residential properties and the fact that the market had seen “phenomenal” growth over the past few years.
However, he said this could not be perceived as a burst in a bubble, but rather that “a correction was due”.
Rebe said due to the property boom there had most likely been many speculative investors who had purchased properties off-plan to try to achieve short-term capital gains.
These owners, he said might find themselves in some difficulty as the short-term rental returns would be way below what they would have planned for when making the purchase 12-18 months ago.
“As the capital value of these properties has most likely remained static or even declined they will have to hold onto the properties until the market starts to move again,” Rebe added.
Depending on condition, specific location and amenities on offer, rents for a studio unit in the CBD range from R8 000 to R9 000, a one-bedroom from R9 500 to R12 000 and a two-bedroom between R12 000 and R16 000.
On the Atlantic Seaboard, to rent a studio could cost R9 000, a one-bedroom up to R13 000 and a two-bedroom between R13 000 and R17 000.
Steer & Co said the drought had also resulted in fewer visitors to the city and property owners previously letting their properties short-term now had to switch their properties into the long-term letting market as the short-term vacancies were high.
This had in turn led to a large amount of new rental stock coming onto the market, creating even more supply.
The company said it was forced to ask for lower rent than it would normally do.
“We are encouraging owners to try to keep tenants that are responsible and reliable by not escalating rentals beyond what else is available in the market. In the case of vacant properties, we are encouraging owners to do the maths in terms of filling a property at a slightly lower rate rather than holding out for a higher rate and suffering a longer vacancy as a result,” said spokesperson Teresa Hamilton.
She said the situation was causing alarm or “at least disappointment” among some property owners.
The Cape Town Central City Improvement District’s communications manager Carola Koblitz said visitor numbers declined at this time of year, hence a few of the apartments to rent were only available for a six-month period.
She said this gave an indication that the owners were hoping to still have these units vacant in time for the end-of-year holiday season.
Rebe agreed, saying the situation was likely to continue for at least the remainder of the year, but “hopefully will bounce back with the beginning of the summer season”.
The developers of the skyscraper Zero2One Tower said they were not concerned about the situation as Zero2One would only come on stream at the beginning of the next economic cycle upturn in 2021.
Chief executive officer of FWJK Development Dave Williams-Jones said: “All purchasers investing in Zero 2 One were in fact going to be investing in their new apartments at 2018 prices and would score handsomely through leveraging the expected increased apartment values based on only a 10% deposit.”