UK real estate group Knight Frank expects Cape Town to be the strongest performer this year among the 45 international property hotspots tracked by its prime global house price index.
The Mother City and Shanghai lead Knight Frank’s prime house price ranking for 2021 with a growth forecast of 5% compared to an average 2% for the index as a whole after zero growth last year.
The index compares "prime" house price movements across major global cities. These are defined as markets comprising the most desirable and expensive properties in a given location — generally the top 5% of each market by value and often with a significant international bias.
A 5% uptick this year may not seem much compared with the almost 50% rally in prime Cape Town property prices recorded by Knight Frank between 2014 and 2017. But it nevertheless signals a marked turnaround at the top end of a sector that has been dogged by falling sales and prices over the past three years.
Local estate agents estimate that last year alone prices on Cape Town’s swish Atlantic seaboard fell about 20%. In Clifton, widely regarded as SA’s most expensive neighbourhood, only five houses changed hands last year, down from 21 in 2019.
Kate Everett-Allen, head of residential research at Knight Frank, says market sentiment initially dipped in the wake of the Western Cape’s crippling 2017/2018 drought. Sales also suffered as a result of a weak SA economy and currency volatility.
There was a further sharp fall in demand among wealthy local buyers last year due to the uncertainty created by the onset of the pandemic, while lockdown-related travel restrictions also brought offshore buying to a halt.
Everett-Allen now expects prime prices in Cape Town to rise "off a low base" thanks to "perceptions of value" as well as last year’s aggressive interest rate cuts, to 50-year lows, which should underpin a recovery in local demand.
The return of large numbers of expats to Cape Town, she believes, should further boost big-ticket housing sales.
In addition, the lifting of international travel restrictions after a successful global vaccine rollout could also prompt offshore buyers to return to SA’s sunny shores.
Everett-Allen expects foreign buying could be spurred by a weaker rand, the remote working trend as well as a post-pandemic rise in demand for second homes in "sun and ski" locations among the world’s high net worth individuals.
It seems SA is already back on the radars of international bargain hunters. Large real estate players such as Pam Golding Properties (PGP) and Seeff have reported a marked uptick in festive season sales, including a number of deals concluded with offshore buyers. For instance, in December PGP sold a five-bedroom bungalow on Clifton’s Fourth Beach to a European investor for R37m, while a Dubai family looking for a holiday home bought a Fresnaye villa for R36m from Seeff.
Ross Levin, MD for Seeff Atlantic seaboard and city bowl, says the group has had a marked pickup in sales priced above R10m. In December, Seeff sold three properties on the Atlantic seaboard for more than R20m apiece.
"Buyers in the R20m-plus sector, despite it offering exceptional value and a lot of great stock not seen on the market before, remain selective," he says.
PGP chief executive Andrew Golding expresses a similar view: "There is no doubt that the past three months have been the busiest at the upper end since the highs of 2017." PGP has seen a "notable" increase in demand for properties listed above R10m on the Atlantic seaboard as well as in the southern suburbs, especially upmarket Constantia.
So far this year, PGP has also received a flurry of serious inquiries for luxury homes in the Cape winelands area of Paarl and Franschhoek.
However, Golding says prices achieved at the upper end are significantly lower than the highs of 2017. And wealthy buyers, much like their middle-and lower-income counterparts, are looking for value.
"With a wide selection of properties to choose from, pricing is imperative if sellers want to divest of their properties within six months," he says. "Only correctly priced properties are selling. This segment of the market is now as price sensitive as any other."
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