Following a pandemic dip, capital growth is once again on the rise along the Atlantic Seaboard, which has become one of the most in-demand areas for both local and international markets, writes Blok CEO Jacques Van Embden.
Over the past decade, Sea Point has become one of the most sought-after neighbourhoods in Cape Town. This is evident in the area’s vibrant high street, that brings together retail, restaurants and service facilities. But even more so, this status has been cemented by demand for property in the area by residential, holiday, and investment buyers alike.
Overall, Cape Town ranks fifth in its World Cities Prime Residential Index, according to global real estate services provider Savills. This index considered prime capital value growth forecast for 2023 versus 2022 as well as prime capital value per square foot and as of December 2022, Cape Town experienced a 5.1% growth with Sea Point leading that charge.
In fact, no other part of Cape Town has seen growth numbers as strong as Sea Point. In the last ten years, Sea Point has experienced an exponential growth trajectory of 10.79% per annum. From 2008 to 2018, this translated to a 300% total growth in the freehold sector and 200% total growth in the sectional title sector, according to a Wesgro report.
The Buy-to-Let Trend
Buy-to-let purchases dropped during Covid, due to lower rental returns and tighter bank lending. The market, however, has bounced back more recently, reflected in the number of home loan applications processed by banks to fund buy-to-let properties —surging almost 30% year on year in the third quarter last year, according to mortgage originator Ooba.
So what can account for this? A major factor is the increase in demand for rental properties in the city, prompted by an influx of new residents ‘semigrating’ to the Western Cape due to the quality of life and perceptions around safety and governance.
Flat vacancy rates on a national level averaged 6,8% in the first quarter of 2023. On a regional level, the Western Cape continues to stand out with its low vacancy rate of 2%, well below the national average.
Otherwise our recent projections were approximately 8% gross yield across all unit types for Long term lets in our new developments. And estimations off gross yields between 8.4% – 11.8% for the same units on Short term letting. This is before deductions of rates and levies.”
Sea Point has enjoyed a 10-year exponential growth trajectory @ 10.79% per annum.
At Blok, our own average Capital Growth sits above @ 12.72% per annum. What makes us particularly proud of this figure is that its base point was taken during the pandemic in 2020, and steadily rose as the rest of the market contracted at this time.
A large part of that success can be attributed to the great capital returns we’ve seen in Sea Point. Because not only has Sea Point proven to be lucrative for the investment property market, it also offers its residents the benefits of a holiday lifestyle and ambience, with the convenience of proximity to the city centre meaning those in the area are both close to their work, as well as the popular beaches of Clifton and Camps Bay, among others.
It should come as no surprise then that Sea Point has become a top destination for capital growth in Cape Town. Our own record in the area is a testament to this fact — something we can say confidently as we launch our 16th development, ONEHUNDREDONM, right in the heart of the suburb.