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Johannesburg - Cape Town's posh residential areas remain more expensive than those of Johannesburg northern suburbs, but South Africa's business capital offers investors seeking rental growth the best returns.
The average price of brag homes in Sandhurst, Westcliff and Houghton is lower than that of properties on the Atlantic Seaboard, Cape Town's City Bowl and the Waterfront, according to recent data from the Global Property Guide.
The guide shows an upmarket four-bedroom house in Johannesburg costs an average $830 441 (R6 261 525), compared to a similar house in Cape Town at $1 705 999 (R12 863 232).
Absa's housing review statistics showed house prices were down in all major metropolitan areas last year, except in the greater Johannesburg area, where a nominal increase of almost 3% was registered. Cape Town home prices dropped by 0.7% in 2009.
However, Jacques du Toit, senior property analyst at Absa, said these figures often don't include Cape Town's priciest property transactions. "Some of those houses in Camps Bay and Bantry Bay are bought with cash," he said.
The guide also suggested investors interested in receiving rental income can expect higher yields in Johannesburg than in Cape Town.
"There has been a lot of fuss over the 2010 Fifa World Cup and the lucrative rental opportunities it is expected to bring for Cape Town," said Vered Estates MD Jonny Novick in an e-mail to Fin24.com.
Novick said investors need to diversify their portfolio beyond seasonal short-term holiday lets.
According to Novick, demand for property in Johannesburg is high throughout the year. This makes it a better investment, as vacancy levels tend to be lower and annuity income more consistent.
The average cost of buying a one-bedroom flat in Johannesburg is $107 637 (R811 582), with a rental value of $1 377 (R10 382) per month, giving a 15% yield per annum.
To buy a small flat Cape Town, the guide suggests you would need to double the property cost figure to $205 660 (R1 550 676), giving an average rent of $1 215 (R9 161) and implying a 7% rental yield.
"Gauteng is the hub of the country's economy," said Du Toit. "It's still the case that average income levels are higher [in Gauteng]."
Novick concurred. "As the financial and industrial powerhouse in Africa, Johannesburg continues to attract new residents, businesses and capital every year," he said.
- Fin24.com