A sign of how Cape Town has surged ahead of other metros as an investment and relocation hotspot is how expensive it has become to rent in the inner city.
Asking prices for two-bedroom apartments in the CBD jumped nearly 40% last year to an average of R24,750 a month. That’s up from R17,768 in 2021, according to the latest annual State of Cape Town Central City Report.
A larger apartment, with three or more bedrooms, will cost more than R70,000 a month — 77% up year on year. Granted, the average has been distorted by a number of big-ticket penthouses to let at prices of up to R120,000 a month.
Still, there’s hardly any stock of apartments with three or more bedrooms available for less than R40,000 a month, according to the report, released this month by the Cape Town Central City Improvement District (CCID).
Rentals for smaller apartments — studios and one-bedroom — have increased to a lesser extent, but they’re still up 28% year on year at average monthly rentals of between R11,586 and R14,233.
The rising rental gap between Cape Town and the rest of South Africa is evident from the latest PayProp data. The residential rental processing firm places the national monthly rental at an average of R8,375 (all sizes of residential units).
Though PayProp’s index for the second quarter shows residential rentals have rebounded across the board, the average 4.3% year-on-year increase recorded for South Africa is nowhere near the growth rates seen in central Cape Town.
Demand for inner-city living has been underpinned by a steady post-Covid return of office workers
It appears that the city’s rental rally comes primarily on the back of rising demand outstripping supply, as the CBD continues to position itself as a 24/7 live, work, shop and play hub.
Rob Kane, CCID board chair and CEO of Cape Town-based Boxwood Property Fund, says the number of apartments to let shrank by almost 75% in the year to December — from 217 to 57 (listings on Property24.com).
The rapid take-up rate of CBD flats is further evident from the same data showing that at end-2020 there were 475 rental apartments on the market.
Kane estimates that the number of tenants in the CBD reached a record 66% (as a percentage of all residents) last year, up from 43% in 2014. The reason, no doubt, is that higher interest rates make renting more appealing than buying.
Demand for inner-city living has been underpinned by a steady post-Covid return of office workers. Kane says the city’s world-class infrastructure also continues to lure new SMEs in the retail, restaurant, leisure and tourism sectors.
He says semigration was also boosted by remote working. “That, coupled with the reputation of the Western Cape — and Cape Town in particular — for reliable municipal services, continues to see a net influx of residents and businesses to the city,” he says.
In addition, international companies, especially those in the fintech space, are choosing the CBD as their preferred location. Kane says besides the increase in actual demand, rentals may also have been supported by more furnished apartments coming to the market. The trend has been supported by the rising numbers of international “digital nomads” flocking to Cape Town.
The surge in the cost of renting an apartment in Cape Town is even more telling given how much money developers and investors have poured into bringing new residential stock to the CBD in recent years. Sizeable developments include The Rockefeller at Harbour Place (398 units), 16 on Bree (381 units), St Martini Gardens (317 units), the Pepperclub Hotel (222 units), Mandela Rhodes Place (215 units), Manhattan Place (196 units), BlackBrick Cape Town (105 units), The Decks (83 units) and The Colosseum (80 units).
CCID estimates show that there are now close to 7,000 apartments in the city centre spread across 79 residential buildings. That’s double the city’s sectional-title offering of 3,500 units in 2014.
Another 22 building projects (new and redevelopments) worth an estimated R3.5bn are under construction or in the pipeline. Most are residential.
These developments, among them One Thibault, The Rubik, The Fynbos, The Barracks and 84 Harrington — the world’s tallest building to be constructed from hempcrete blocks — are set to boost stock levels with more than 2,000 additional apartments on completion over the next 12 to 24 months.
Residential rentals in the V&A Waterfront, city bowl and Atlantic seaboard are also surging, says Ross Levin, licensee for Seeff Atlantic seaboard (Sea Point to Camps Bay) and city bowl. These are now an average 15%-20% above their 2020 lows.
Levin says rental demand in the Atlantic seaboard is very active in the R25,000-R45,000 a month bracket. There is also increased demand for super-luxury villas in the R50,000-R100,000-plus segment. Seeff recently signed leases of up to R130,000 in Bantry Bay and R120,000 at the V&A Waterfront.
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