Drought dulls thirst for some of Africa's most expensive homes

House price inflation in the city, while still outstripping the rest of the country, slowed to 9.7% in the fourth quarter, from as high as 15% two years ago, Standard Bank economist Siphamandla Mkhwanazi said in a note on Friday. And it’s just the beginning, he warned.

• READ: Bigger factor than water impacting Cape property market - economist

“Although it would be difficult to separate and quantify the reasons for this easing growth, the Cape Town water crisis will have exacerbated it,” Mkhwanazi said.

“The drought, and government’s slow response, will affect consumer sentiment negatively; demand for property is therefore expected to suffer and, ultimately, further dampen house-price inflation.”

The country’s top tourist destination is in the throes of the worst drought on record, and water levels in its six main supply dams have plummeted to an average of 26.3%, from more than 90% four years ago.

With the winter rainy season still about four months away, residents may find themselves lining up for a daily ration of 25 litres each from April 16 unless water usage declines sharply.

The drought has led to job losses in agriculture, depressing household income growth, Mkhwanazi said.

“The diminishing relocation of high net worth individuals to the Western Cape” is also affecting demand, he said.