Investors like what they see in Cape Town’s CBD
But report finds that high cost of private property makes it difficult for private developers to construct much-needed affordable housing
The property market in Cape Town’s central business district (CBD) is benefiting from strong investor confidence, according to the latest State of Cape Town Central City Report produced by the Cape Town Central City Improvement District (CCID).
However, the CCID said, the high cost of private property in the CBD, even underutilised commercial buildings, made it difficult for private developers to construct much-needed affordable housing in and around the area.
The CCID is a private-public partnership that provides complementary urban management services in parts of Cape Town’s inner city.
Its report released on Thursday stated that about R16.2bn of investment had, conservatively, been committed to the Cape Town central city between 2012 and 2019.
Between 2012 and the end of 2016, close to R4.5bn in property investment was completed. There were also R4.32bn worth of properties under construction and another R7.4bn either in planning or in proposal development phase.
CCID chairperson Rob Kane said: "We use the term ‘conservatively’ as we base our calculations only on developments for which we have been able to confirm investment values. Sometimes the costs of developments announced have not yet been revealed by developers, and thus the numbers we publish in the report are only those that have appeared somewhere in the public domain."
The City of Cape Town’s latest official property valuation in the CCID footprint is at R30.6bn, up from about R24bn in the 2014-15 financial year.
Kane said values could go well beyond R42bn by 2019, taking all current construction and proposed projects into account.
There was also enormous anticipation around the City of Cape Town’s proposed Foreshore Freeway Precinct Project, in which it is hoped successful public-private partnerships will be formed to develop affordable housing in the CBD.
"We have a substantial CBD workforce that commutes many hours a day to get to work and spends up to 40% of their income just on transportation," said Kane.
The CBD in Cape Town has been a victim of its own success as its expansion and development has led to a steep increase in residential property prices.
Carola Koblitz, CCID communications manager and the editor of the report, said: "We are very aware that for a downtown to succeed as both a business and residential node, it must be accessible to all economic groups if you are to create a truly vibrant downtown community."
For this reason, the latest report included extensive analysis on the four different "nodes" or precincts that exist within the CBD footprint.
"We have researched everything from the value of developments since 2012, the breakdown of business sectors and the type and volume of retail that exists in each precinct, to where educational institutes and residential complexes are located — and in terms of the latter, who’s living where and what their lifestyle preferences are."
This, said Koblitz, was also done to outline where new business or development opportunities could lie.
Commercial property trends outlined in the report also demonstrate confidence in the CBD. According to figures supplied by the South African Property Owners Association (Sapoa), commercial vacancy rates are down to 9.4% overall, from 10% in 2015, with the most significant drop occurring in the premium grade where year-on-year vacancies have fallen from 25% (in 2015) to 13.8% (in 2016).
Retail occupancy rates have also held relatively firm, with a marginal decline overall from 95% in 2015 to 94% in 2016.
Koblitz said the residential segment continued to do extremely well and the average unit price across the central city had increased from about R2m in 2015 to R2.3m in 2016.