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Cape Town’s luxury residential property market saw growth of 19.9% last year, the second-best performance worldwide, according to Knight Frank's Prime International Residential Index (PIRI) 100.
The index tracks the annual performance of the world’s leading prime second home and city residential markets. The overall index increased by just 2.1% in 2017, only moderately outperforming the 1.4% growth recorded in 2016.
Two-thirds of the locations in the PIRI 100 index recorded static or positive annual price growth in 2017, with only 11% of the locations posting double-digit returns.
Only China’s Guangzhou (27.4%) recorded higher growth in its luxury residential property market, according to the latest index.
Cape Town beat the remaining Top 10 cities, including Aspen (19%); Amsterdam (15%); Seoul (13.2%); Frankfurt (12.9%); Seattle (12.2%); Paris (12%); Sydney (10.7%); and Madrid (10.6%).
“Cape Town is fast becoming a truly global holiday destination and an increasingly desirable residential address for SA’s high net worth individuals (HNWIs), as well as those from abroad,” says Deon de Klerk, head of wealth for Africa regions at Standard Bank.
'Monaco of the south'
“The luxury residential property market in the city has really been able to capitalise on its new-found reputation as the ‘Monaco of the South’.”
In the last two years Cape Town has set South African records for both the highest-ever sale price achieved for a residential home - R290m for a house in Bantry Bay – as well as the highest-ever rental price - R450 000 a month for an estate in Constantia.
Knight Frank attributes the strong performance of Cape Town’s luxury residential property market, which also outperformed the city’s wider mainstream market by some margin, to a combination of both demand and supply related factors.
On the demand side, the areas near Table Mountain, including the Atlantic Seaboard and City Bowl, continue to attract strong inward migration from other parts of the country as well as sustained foreign buying.
On the supply side, prices were further underpinned by the lack of existing stock or new development opportunities in Cape Town’s prime locations, most of which are sandwiched between the mountains and the ocean.
“Anecdotally we know that there is a lot of ‘semigration’ occurring, with many South Africans opting to relocate to the Western Cape before they consider emigrating to other countries,” says De Klerk.
Typical prices in Cape Town range from R1.2m for a small studio apartment to R30m for a penthouse apartment. Two-bedroom, two-bathroom apartments with secure parking fetch about R5m on average, the report said.
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