Whether as buy-to-let investments or as a convenient home to those looking for secure, lock-up-and-go convenience, apartments remain a popular choice for property investment among Cape Town’s buyers.
Linda Erasmus, CEO of Fine & County Sub-Saharan Africa, says well located apartments offer investors good growth potential as well as rental returns. “In the Cape suburbs, apartments also often offer wonderful ocean or mountain views,” she says.
Christopher Hajec, licensee of Fine & Country Atlantic Seaboard, which operates in the Atlantic Seaboard, City Bowl, V&A Waterfront and the Cape Town CBD, says: “In a city that is limited in space as it is bordered by mountain or sea, apartments offer a way to provide the density needed to accommodate the demand of locals who want to be in the city and outside of Cape Town’s congested rush hour traffic. However, even though there are spectacular penthouses and luxury R45 million apartments on offer, affordability is by far a key component in the desirability of apartments.”
Hajec notes that in the more expensive Atlantic Seaboard, apartments offer holiday home purchasers the all-important lock-up-and-go option without having to worry about the year-round maintenance associated with freehold properties. “They also provide a much more affordable entry into the market than freehold properties at approximately half the price, on average, and even lower at entry level,” he says. “These apartments are also always easy to rent, despite fluctuations in the market, because of their affordability.”
Looking at the City Bowl and CBD areas, Hajec says apartments offer an affordable entry point to the Cape Town real estate market, and are excellent opportunities for investors as the rate of return averages anywhere between 6% and 8% for a long-term tenant. “Despite recent fluctuations in the market, these apartments can also be offered for short-term rentals to maximise return at between 10% and 12%, and more,” Hajec said.
Apartments in the City Bowl, he says, are perfect for both young professionals and mature couples as they are central to the arts, culture and professional spaces that Cape Town is renowned for. In the CBD, on the other hand, apartments have been mostly seen as an investor’s affordable foothold into the Cape Town market, an affordable corporate crash pad, a young professional’s first purchase or an Air B+B opportunity.
“Affordability is a key motivating factor straight across the board as well as the obvious benefits of the central position of the CBD to everything professionals and tourists alike want to be close to,” Hajec says, “The 10 minutes or so to the V&A Waterfront, Parliament, Convention Centre, offices of many national and multi-national corporates, museums, the beach, Table Mountain, or the amazing culinary culture that Cape Town has to offer, makes the CBD the perfect position for many.”
Simoné Croeser, property consultant at Fine & Country Helderberg, who operates in Strand (Beach Road) and throughout Somerset West, says apartments in these areas are attractive to buyers for several reasons, but mostly their location, security and lifestyle features, and their appreciation potential and rental returns.
“Apartments on Stand’s Beach Road are a good investment option due to the rental demand in the area and, therefore, the high rental returns they offer,” she says. “Apartments located in the broader Somerset West area benefit from the higher-than-average annual growth the area achieves compared to others as well as high rental returns.”
The fact that Cape Town has a steady supply of apartments, be it from students, professionals, tourists or confirmed urban dwellers makes it a good investment option, Hajec says. “Add to this the price of freehold properties frequently being out of reach of the average home buyer, investors know that for an investment they can afford they will seldom lack for tenants at a higher-than-average price (compared to South Africa’s other major metros) and their return is in keeping with national averages while the capital appreciation is well above average.”
Hajec adds that the Cape Town market is highly desirable for tourists and can attract short-term renters who can frequently make one’s investment viable as an Air B+B offering. He says: “If this model is successfully implemented and managed, it can yield a return well above average and has been a very attractive incentive that has encouraged many people into the real estate investment market.”
Croeser says Strand buyers tend to be mostly retired people, local and foreign investors and holiday apartment buyers, owing to its location, while the buyer profile of those investing in Somerset West apartments is mainly of local investors, overseas clients looking for holiday homes and first-time buyers.
As for price, Croeser says R3,4 million is the average sales price for a three-bedroom apartment in Hibernian Towers, an apartment complex on Strand’s Beach Road. “This will buy a large, spacious apartment with lift access and superb ocean views that includes two secure, undercover parking bays,” she says.
In Somerset West, Croeser says, R2 million is average for a three-bedroom, ground-floor apartment in the De Velde apartment complex, private garden included.
On the Atlantic Seaboard and in the City Bowl, apartment prices literally run the full gamut, Hajec says. He says: “Prices range from ‘micro units’ in Cape Town’s CBD and Sea Point, which are priced from around R1,2 million on average for around 30m² of space that can be likened to a comfortable but by no means oversized hotel room, to super luxury penthouse units of 300m² and more, which can run upwards of R25 million with the sky being the limit.”
He speaks of a R18 million, 300 m² penthouse unit in Fresnaye, spread over three levels, with breathtaking sea and mountain views and its own private lift. “There are also many examples of R2,8 million to R4,5 million more ‘affordable’ apartments to be found in Gardens, Tamboerskloof, Oranjezicht and Vredehoek, that offer a middle-class professional a place to hang their hat offering anywhere from 95 m²-175 m² of space,” Hajec says. “The rule of thumb is the older the building generally the more affordable per square metre, but this is not always the case.”
In Strand and Somerset West, the number one thing for buyers searching for the perfect apartment is overall upkeep of the building and ensuring the body corporate has healthy financials. Croeser says the general state of the building and the body corporate’s financial standing will impact on levies and special levies as well as the apartment’s future growth potential.
Hajec says price generally is the most important factor influencing buying decisions, closely followed by position. “However,” he says “on the Atlantic Seaboard, price is far less of a deal breaker than the view or position. Other location factors – proximity to the beach, to amenities, shelter from the wind – are also important ones for buyers to take note of.”
For more information: visit www.fineandcountry.com/sa.
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