All sources have been thoroughly verified for credibility. Furthermore, a local real estate expert has reviewed and approved the final article.
Yes, the analysis of Cape Town's property market is included in our pack
Thinking of investing in real estate in Cape Town? You're not alone!
Many people are enchanted by Cape Town's scenic beauty and dream of owning a luxury villa or a modern apartment with stunning views there.
Is it worth investing there, though? Are property prices increasing in Cape Town? What is the current trend? Should I buy property in Camps Bay or City Bowl? Are there any secret taxes? Which place will give me the best yields?
We've solved it for you.
At TheAfricanvestor, we know this market inside and out. Actually, we've compiled all our findings in one pack. Get it now.
In this article, we'll provide you with helpful information.
How is the property market in Cape Town?
Is the property market going up or down? Let's look at fresh data and statistics.
Property types
In Cape Town, you can find various types of properties for sale, including apartments, houses, townhouses, and vacant land.
Apartments are typically smaller living spaces within multi-story buildings, while houses offer more space and privacy. Townhouses are a mix between apartments and houses, often sharing walls with neighbors.
Vacant land refers to undeveloped plots where you can build your own property.
Each option offers different features and price ranges to suit your preferences and needs.
Better to buy or rent?
(If you plan to use it yourself and not as a rental)
If Cape Town has captured your heart as your city of choice, you might be considering whether it's better to buy a property or opt for renting in this stunning South African city.
Without a doubt, it's better to buy if you want to build long-term wealth and security through owning a valuable asset.
Our advice? Use the property price-to-rent ratio as your decision-making compass. This helps you understand the connection between rental income and the property's current price in terms of years.
According to Numbeo, the property price-to-rent ratio in Cape Town is around 13.24, which is below the world average.
Simply put, on average, you could buy a property with just 13 years' worth of rental payments. Worth buying.
Property prices in Cape Town
On average, according to the last data from South African Reserve Bank (SARB), purchasing a property in Cape Town would cost you around $1,990 per square meter.
Naturally, things are quite spread out. A beachfront property in Cape Town might have a different price per square meter than a house in Constantia. We actually give you a more detailed breakdown in our pack for buying property in Cape Town and in South Africa.
To put things in perspective, it is 10 times less than the property prices in the center of New York.
However, housing prices in Cape Town are higher (157%) than in Johannesburg.
The most expensive neighbourhoods in Cape Town are probably the Atlantic Seaboard and City Bowl, while the most affordable neighbourhoods are probably in the southern and northern suburbs.
Trends
First and foremost, we have to acknowledge that South Africa is, nowadays, a relatively stable country. The last Fragile State Index that has been reported for this place is 72.
This is important to remember when wondering if it's a good investment to buy a property in Cape Town.
Also, according to the IMF’s forecasts, South Africa's economy is expected to soar by 6% in the coming 5 years, resulting in an average GDP growth rate of 1.2%.
If you intend to invest in real estate in Cape Town it's a good thing because a positive growth rate (usually) leads to higher incomes for citizens, enabling them to invest in real estate, which boosts demand and prices for properties.
Also, in South Africa, the average GDP per capita has changed by -3.7% over the last 5 years. It is a concerning and unsettling statistic.
Looking for more updated data? We've done a big-picture study to find out if it's a good idea to purchase property in South Africa right now.
Buying property in Cape Town
Buying real estate in Cape Town can be difficult due to the lack of reliable and up-to-date information available. That's why we have created the pack to buy property in Cape Town and in South Africa.
Buying process
Within our pack, we've covered the entire buying process extensively. This includes a detailed breakdown of prices and yields based on the area, advice on negotiating prices, and information about obtaining a mortgage.
Now, we're providing you with a simplified version.
This is the step-by-step process to purchase a property in Cape Town:
- Determine your budget and property preferences in Cape Town.
- Appoint a qualified estate agent familiar with the Cape Town market.
- Search for properties in Cape Town that meet your criteria.
- Arrange viewings and visit the properties in person.
- Perform due diligence, including Title Deed searches and zoning checks specific to Cape Town.
- Obtain a home loan pre-approval from a South African bank.
- Make a written offer to purchase, using the Offer to Purchase form, unique to South Africa.
- Negotiate the terms and price, considering local property market conditions.
- Sign the Offer to Purchase, along with a disclosure form outlining property defects.
- Deposit the earnest money into the conveyancer's trust account.
- Complete the transfer process with the help of a conveyancer, who handles property transfers in South Africa.
- Take possession of the property and register it in your name at the Cape Town Deeds Office.
Also, if you're not from the country, you might want to check our article on how to buy property as a foreigner in South Africa.
Make a profitable investment in Cape Town
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Where to find a property
Discover properties in Cape Town through these websites:
- Private Property - A comprehensive South African real estate website for buying, renting, selling, and property advice services.
- My Property - A transparent property portal for buying, selling, and renting homes with valuable insights.
- Property24 - South Africa's largest property search portal, offering houses, flats, land, and farms for sale or rent.
- RentUncle - A user-friendly platform offering a wide range of rental and sale listings, featuring map search, search alerts, and rent comparison tools.
- RE/MAX - The largest real estate company in Southern Africa, providing services for buying, selling, renting, and property valuation.
Also, know that we have included contacts of real estate agencies, property lawyers, moving companies, expats communities and more in our pack for buying property in South Africa.
Which properties for which budget?
As mentioned before, the average price per sqm in Cape Town is $1,990. A one-bedroom property with an area of 60 square meters would cost approximately $119,000, while a two-bedroom with an area of 85 square meters would cost approximately $169,000.
However, as you can guess, property prices will differ based on the attributes of the property and its specific location.
Expect property prices to be on the higher side in the premium areas of Cape Town. A residence in Camps Bay might be around $480,000, while a property in Clifton could cost about $210,000.
Nevertheless, there are spots that are more accommodating to your wallet. You may find a house in Khayelitsha for $150,000, or a house in Mitchells Plain priced only at $130,000.
Find a more detailed price list in our full pack for buying property in South Africa.
Common mistakes
Here are the main pitfalls specific to buying a property in Cape Town, South Africa:
- Excessive bureaucracy and lengthy legal processes.
- The threat of land restitution claims affecting property ownership.
- Load shedding and power supply issues impacting daily life.
- Water restrictions and potential drought-related challenges.
- Foreign buyer restrictions and complex regulations.
- High property transfer costs and taxes for international buyers.
- Security concerns due to high crime rates in certain areas.
- Fluctuating property market influenced by socio-economic factors.
We don't want this to happen to you, so we have included a full checklist for your property investment in our pack of documents. Avoid these mistakes and save a lot of money.
Everything you need to know is included in our South Africa Property Pack
Living in Cape Town
Living in Cape Town is a great experience, offering a vibrant city life with stunning natural beauty and plenty of opportunities for outdoor activities.
Cost of living
The cost of living in Cape Town is generally lower than in other major cities in South Africa, making it an attractive option for expats. However, the cost of housing is relatively high compared to other parts of the country, so it is important to research the housing market before making a move.
Here are some examples to better understand the cost of living in Cape Town, South Africa:
- Rent for a one-bedroom apartment in the trendy neighborhood of Camps Bay: $1,200 per month.
- A meal at a local restaurant with a traditional "Bunny Chow" dish: $8.
- Monthly MyCiTi bus pass for convenient city transportation: $30.
- Utilities (electricity, water) for a small apartment in the suburb of Rondebosch: $80 per month.
- A bottle of South African Pinotage wine from the Constantia Valley: $12.
- Entrance fee to the iconic Robben Island Museum: $20.
- Monthly membership at a popular Cape Town fitness brand like Virgin Active: $40.
- A cup of "Rooibos" tea, a popular local herbal tea, at a café in Long Street: $2.
Neighbourhoods
We want to show information in an easy-to-understand way. So, we made a summary table that lists the different areas in Cape Town. For yields, prices and rents, check our property pack.
| Neighborhood | Description | Strengths | Weaknesses |
|---|---|---|---|
City Bowl | City Bowl is a vibrant and central neighborhood, nestled between Table Mountain and the Atlantic Ocean. It offers stunning views, diverse culture, and easy access to the city's amenities. | Stunning views, diverse culture, convenient location. | Higher cost of living, limited space for expansion. |
Sea Point is a lively coastal neighborhood known for its scenic promenade and a variety of shops, restaurants, and entertainment options. | Beautiful ocean views, bustling community, excellent amenities. | Can get crowded, high noise levels, limited parking. | |
Woodstock | Woodstock is a trendy and artistic area, filled with street art, hip cafes, and unique boutiques. It's popular among the creative community. | Artistic vibe, vibrant street culture, close to the city center. | Crime rate, traffic congestion, ongoing gentrification. |
Green Point | Green Point is an upmarket neighborhood with a picturesque location near the sea and the famous Cape Town Stadium. It's known for its modern residential buildings and vibrant nightlife. | Close to waterfront attractions, modern infrastructure, diverse nightlife. | Expensive real estate, high demand, limited green spaces. |
Bo-Kaap | Bo-Kaap is a historic and colorful neighborhood known for its cobbled streets and brightly painted houses. It has a rich cultural heritage and is home to the Cape Malay community. | Cultural heritage, vibrant atmosphere, close-knit community. | Limited parking, tourist crowds, some safety concerns. |
Observatory | Observatory, or "Obs," is a bohemian neighborhood popular among students and artists. It has a laid-back vibe with numerous coffee shops, art galleries, and live music venues. | Artistic community, affordable housing, diverse dining options. | Some safety concerns, traffic congestion during peak hours. |
Claremont | Claremont is a bustling suburb known for its shopping centers, schools, and sports facilities. It's a family-friendly area with a mix of residential and commercial spaces. | Good schools, shopping convenience, recreational facilities. | Heavy traffic, limited public transport options. |
Constantia | Constantia is an affluent suburb with large estates, lush greenery, and world-class wine farms. It's a peaceful and luxurious area with a strong emphasis on outdoor living. | Prestigious properties, beautiful landscapes, wine estates. | Expensive real estate, lack of public transport, limited nightlife. |
Greenmarket Square | Greenmarket Square is a historic cobblestoned square surrounded by cafes, shops, and art stalls. It's a vibrant and popular spot for tourists and locals alike. | Historic charm, lively atmosphere, unique shopping experiences. | Can get crowded, limited parking, some street vendors can be pushy. |
Tamboerskloof | Tamboerskloof is a tranquil and leafy neighborhood situated on the slopes of Signal Hill. It offers beautiful views and a sense of community. | Scenic beauty, peaceful environment, close to city center. | Hilly terrain, limited public transport, parking challenges. |
Hout Bay | Hout Bay is a coastal neighborhood with a picturesque bay and beach. It's a popular spot for outdoor activities like hiking, water sports, and boat trips to Seal Island. | Beautiful bay views, outdoor activities, close-knit community. | Traffic congestion, limited job opportunities, some crime. |
Life in Cape Town
Cape Town's economy is largely driven by tourism and the service sector. It is also home to a number of major industrial and manufacturing companies, as well as a growing number of small and medium-sized businesses.
What expats usually like the most in Cape Town is the incredible scenery, from Table Mountain to the nearby beaches, and the vibrant culture, with its diverse mix of cuisines and art scenes.
However, the crime rate of Cape Town is still very high (with a value of 74, one of the worst scores in the world). The most common crimes in Cape Town are property-related crimes such as burglary, theft, and robbery.
Also, you have to know that Cape town could face water scarcity and occasional wildfires due to its semi-arid climate.
A good point for a property investor - Cape Town has a mass rapid transit system called the MyCiTi bus system.
Access to healthcare in Cape Town is very good, with a Healthcare Index of 68. A good healthcare system will always benefit the real estate market of a place.
Finally, it is worth noting that the University of Cape Town ranks among the top 200 universities in the world.
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Renting out in Cape Town
This part is for you if you want to buy a property with the goal of renting it out and making money from it, rather than living there.
Long-term
Tenant Profiles in Cape Town
According to the data reported by Wikipedia, the home ownership rate in South Africa is 70%, which is average.
It means that, if you decide to buy and rent out in Cape Town, there will be a good number of people who can become your potential tenants.
If you decide to buy and rent out to long-term tenants, you should target young professionals, students, and families looking for a safe and convenient location in Cape Town. There are also a large number of expats and short-term visitors who are looking for accommodation in the city.
Here is a little summary table we've made for you.
| Property type and area | Profiles of potential tenants | What they are looking for | Expected monthly rent in $ |
|---|---|---|---|
Apartment in City Bowl | Professionals, expats | Urban living, proximity to CBD | $800 - $1500 |
Townhouse in Southern Suburbs | Families, students | Suburban lifestyle, schools | $700 - $1200 |
Studio in Sea Point | Youth, professionals | Coastal living, trendy area | $600 - $1000 |
Villa in Camps Bay | Affluent families, tourists | Luxurious beachfront, entertainment | $2000 - $5000 |
Apartment in Observatory | Students, young professionals | Near universities, cafes | $500 - $900 |
Loft in Woodstock | Artists, creatives | Trendy area, cultural scene | $700 - $1200 |
House in Hout Bay | Family, nature enthusiasts | Scenic beauty, outdoors | $1200 - $2500 |
Rental yields
Nowadays, Cape Town offers some opportunities in terms of rental yields. Actually, you can easily achieve 7 or 8% due to the city's high demand for rental properties and relatively low supply.
Cape Town properties close to the city centre and public transport routes tend to offer the best rental yields due to their high desirability among tenants. Properties with multiple bedrooms, such as apartments and townhouses, are also attractive to tenants and offer higher rental yields than single-family homes.
For further explanation and a more detailed breakdown, you can check the reports and analyses we have made.
Finally, be aware that rental incomes in Cape Town are taxed at 20%, which is rather good.
Short-term
You could also decide to rent short-term to tourists visiting Cape Town, as well as business travelers and students attending conferences or universities in the city. Additionally, you could rent to people coming to Cape Town for special events, such as weddings or concerts.
If you decide to go with that option, look for properties in the City Centre, Sea Point and Green Point areas of Cape Town, as these are popular tourist destinations and have high demand for short-term rentals.
You will have some competition though - there are around 16,000 Airbnb listings in Cape Town. The average daily rate stands around $90.
You have the opportunity to generate a nice additional income stream then. According to online testimonials and analytics platform like AirDNA, Guesty and Inside Airbnb, people who offer short-term rentals in Cape Town can make around $1000 per month. Also, the average occupancy rate is estimated at 61%.
Is it worth buying real estate in Cape Town then?
Buying property in Cape Town can be a fantastic investment, but it's not a one-size-fits-all scenario. If your goal is long-term wealth accumulation and financial security, it's a smart move. The property price-to-rent ratio in Cape Town is favorable, suggesting that you can recoup your investment over time through rental income. Plus, South Africa's anticipated economic growth can drive property demand and value appreciation.
However, if you're looking for a quick profit or have concerns about upfront costs, Cape Town might not be the right choice. The property market here is more about slow and steady growth than rapid returns. Also, navigating the complex regulations and high property transfer costs can be daunting for international buyers.
Moreover, Cape Town does have security and environmental challenges, so you should carefully choose your neighborhood. In essence, if you're in it for the long haul, Cape Town can be a property investment gem, but if you're seeking short-term gains or simplicity, you might want to explore other options.
Make sure you understand the real estate market in Cape Town
Don't rush into buying the wrong property in South Africa. Sit, relax and read our guide to avoid costly mistakes and make the best investment possible.
The content provided here is for informational purposes only and does not imply endorsement or advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information, including text, images, links, or other elements in this material. Following the content and analyses presented here does not assure specific outcomes. For guidance tailored to your individual circumstances, it is recommended to consult with a professional, such as a lawyer, accountant, or business advisor.