Cape Town: The flirting is over

Dylan Burke - IPS

8 March 2008

Cape Town, the unofficial tourist capital of South Africa, known to all as the Mother City. It is a city adorned with almost year round sun, endless beaches, a thriving property market and a population that is as passionate for its property as it is for its sports.

For its mere 2499km² foot print, Cape Town has found itself as a favorite in the global market, a market that is passing through an unhurried period; the result of 2 factors, the interest rate hikes and the new National Credit Act.

The effects from the slowdown period have been noticeable predominantly in the residential market; with the sales of units above R1M becoming increasingly difficult to sell, however units around the R500 000 mark selling with a great deal of ease. There has been a notable success with the sales of smaller apartments, mainly bachelor apartments (student) in the Cape Town area, with rentals achieving amounts of R3 300/month. The price growth of luxury houses is slowing down faster, while more affordable houses are gaining popularity.

“Previously, the residential component was extremely popular as it responded quicker to economic growth and interest rate cuts than the commercial and industrial sectors, but now because of the rapidly growing economy and the lowest interest rates in 40 years, the commercial and industrial sectors are catching up.” says Heath Adamson, MD of International Property Solutions. “Additionally, the low interest rates have also spurred strong manufacturing growth which has boosted industrial property occupancy rates and a demand both to purchase and to let.”

With an average of 35% rental growth over the past 2 years, it is no wonder the commercial and industrial property market is growing in popularity. The residential sector always follows the commercial and industrial property market, with this in mind it is a safe assumption to state that the commercial and industrial market is building steam to take full stride and reach record highs.

There have been many consolidations in the market with the interest rate hikes taking effect, a noticeable tightening of market conditions, with the residential property price growth maintaining a moderate single digit growth. This will have an effect in the buying circles, those affects taking form in a slowdown in the volume of transactions taking place; thus forcing sellers to adjust their expectations to market related prices.

The city is going through a period of vast growth. This growth is most noticeable in the forms of the recently launched first phase of the M12 corridor. the corridor that will facilitate traffic flow between Cape Town's northern suburbs and the central business district. This has always been a noticeable issue when traveling between the two suburbs, with this ease of movement, will, exponential growth in business will come.

The tournament that is set to generate R70 billion worth of revenue is no further than 795 days away. With the Green Point Stadium one third complete and set to be completed by mid December 2009, six months ahead of the Soccer world cup in 2010, Cape Town is set to take the world platform by storm.

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