Cape Town, SA’s top tourism destination, is set to be among the top-20 performing cities in terms of house price growth, global property services group Savills says in a report.
According to the Savills world cities prime residential index, the Mother City is expected to achieve growth in 2020 of 2%- 3.9%, along with other global cities including Berlin, London, Singapore and Shanghai.
This year capital values across the 27 cities in the index are forecast to grow by 1.8% on average, said Andrew Golding, CEO of the Pam Golding Property group (PGP), which works in association with Savills.
Cape Town has recovered after tourist visitor numbers weakened in 2018 and part of 2019 amid its day-zero water-saving measures, Golding said.
“Despite the ongoing economic challenges faced, including the reintroduction of load-shedding, we continue to see signs of green shoots in the residential property market place, including the Cape metro.
“Having experienced a period of correction in regard to house prices, first-time and a mix of other home buyers are seeing the market in a positive light, further buoyed by financial institutions’ robust appetite for lending,” he said.
House price inflation was muted last year, with a national growth of 2.7% from January to November, Golding said.
But transaction volumes showed some growth during the course of last year. According to Lightstone, house price inflation in Cape Town, at 3.7% from January to September 2019, remained above the national average of 2.6%.
“What’s evident as seen below is that Cape Town offers international property investors exceptional value for money,” Golding said.
Residential property in the city could fetch as much as €3,000 per square metre, compared with €9,000-€24,300 in New York.
Samuel Seeff, chair of Seeff Properties, says he expects entry-level property to fare better than the top end of the market, which is expected to have muted growth.
“There may be very little change from last year. The outlook for the Cape remains flat, with about 4% growth at best. At the upper-end market, above R10m, asking prices will remain under pressure and more so above R20m,” he said.
The entry-level market up to about R1.5m was likely to achieve better price growth as this sector of the market generally required housing finance and benefited from a positive bank lending landscape and the recent drop in interest rates, he said.
Meanwhile, Cape Town is enjoying a strong summer season, with growth in the number of tourists from its core markets — the UK, US, Germany and the Netherlands.
The City of Cape Town said forward bookings predicted a 30% increase in visitors from the UK alone from December last year to March 2020.
Portugal’s capital, Lisbon, is forecast to have the highest prime price growth among the 27 countries indexed, at 6%-8%.
This spike in prices was driven largely by a general lack of supply compared with the level of demand within the city. There was still considerable investment by international buyers, though at a slower rate than previous years.
PGP and a number of other estate agencies offer South Africans opportunities to invest in Portugal to gain access to the EU.
Golding said that while Berlin was the strongest performer in capital value terms in 2019, the outlook for 2020 remained uncertain because of the proposed introduction of a rental cap in the city, which could deter some investors from buying houses and apartments there.
“This is causing uncertainty in the prime markets which, to date, had been seeing strong interest from end users and investors looking for income returns. If the proposed cap does not come into effect, prices are forecast to continue to rise, but at a lower rate,” he said.
Moscow is projected to have price increases of 6%-7.9% in 2020, where more than 97% of transactions are domestic.
Paris and Amsterdam re-emerged as two of the most attractive investment environments in Europe. Prices are forecast to grow 4%-6% in 2020.