Whether as buy-to-let investments or as a convenient home to those looking for secure, lock-up-and-go convenience, apartments remain a popular choice for property investment among Cape Town’s buyers.
Linda Erasmus, CEO of Fine & County Sub-Saharan Africa, says that well located apartments offer investors good growth potential as well as rental returns. “In the Cape suburbs, apartments also often offer wonderful ocean or mountain views,” she says.
Christopher Hajec, licensee of Fine & Country Atlantic Seaboard, which operates in the Atlantic Seaboard, City Bowl, V&A Waterfront and the Cape Town CBD, says: “In a city that is limited in space as it is bordered by mountain or sea, apartments offer a way to provide the density needed to accommodate the demand of locals who want to be in the city and outside of Cape Town’s congested rush hour traffic. However, even though there are spectacular penthouses and luxury R45million apartments on offer, affordability is by far a key component in the desirability of apartments.”
He notes that in the more expensive Atlantic Seaboard, apartments offer vacation home purchasers the all important lock-up-and-go option without having to worry about the year round maintenance associated with freehold properties. “They also provide a much more affordable entry into the market than freehold properties at approximately half the price, on average, and even lower at entry-level. These apartments are also always easy to rent, despite fluctuations in the market, because of their affordability,” he says.
Looking at the City Bowl and CBD areas, Hajec says that apartments offer an affordable entry point to the Cape Town real estate market and are excellent opportunities for investors as the rate of return averages anywhere between 6% and 8% for a long-term tenant. “Despite recent fluctuations in the market, these apartments can also be offered for short-term rentals to maximize return at between 10% and 12% and more.”
Apartments in the City Bowl, he says, are perfect for both young professionals and mature couples as they are central to the arts, culture and professional spaces that Cape Town is renowned for. In the CBD on the other hand, apartments have been mostly seen as an investor’s affordable foothold into the Cape Town market, an affordable corporate crash pad, a young professional’s first purchase or an Air B+B opportunity.
“Affordability is a key motivating factor straight across the board as well as the obvious benefits of the central position of the CBD to everything professionals and tourists alike want to be close to - 10 minutes or less to the V&A Waterfront, Parliament, convention centre, offices of many national and multi-national corporates, museums, the beach, Table Mountain or the amazing culinary culture that Cape Town has to offer makes the CBD the perfect position for many,” says Hajec.
Apartments in the Helderberg
Simoné Croeser, property consultant at Fine & Country Helderberg, who operates in Strand (Beach Road) and throughout Somerset West, says that apartments in these areas are attractive to buyers for a number of reasons, mostly due to their location, security and lifestyle features and of course their appreciation potential and rental returns.
“Apartments on Stand’s Beach Road are a good investment option due to the rental demand in the area and therefore the high rental returns they offer. Apartments located in the broader Somerset West area benefit from the higher than average annual growth the area achieves compared to others, as well as high rental returns,” she says.
The fact that Cape Town has a steady supply of demand for apartments, be it from students, professionals, tourists or confirmed urban dwellers makes them a good investment option, according to Hajec. “Added to this, with the price of freehold properties frequently out of reach for the average homebuyer, investors know that for an investment they can afford, they will seldom lack for tenants at a higher than average price (when compared to South Africa’s other major metros) and that their return is in keeping with national averages while the capital appreciation is well above average.”
Hajec also points out that the Cape Town market is highly desirable for tourists and can attract short term renters who can frequently make one’s investment viable as an Air B+B offering. “If this model is successfully implemented and managed, it can yield a return well above average and has been a very attractive incentive that has encouraged many people into the real estate investment market,” he says.
According to Croeser, buyers in Strand tend to be mostly retired people, local and foreign investors and holiday apartment buyers due to its fantastic position, while in Somerset West the buyer profile of those investing in apartments is mainly made up of mainly local investors, overseas clients looking for holiday homes and first time buyers. \
Talking price points, Croeser says that R3,4million is the average sales price for a three-bedroom apartment in Hibernian Towers, an apartment complex situated on Strand’s Beach Road. “This will buy a large, spacious apartment with lift access and superb ocean views that includes two secure, undercover parking bays.”
In Somerset West she says that R2million is the average sales price for a three-bedroom, ground floor apartment in the De Velde apartment complex for that includes a private garden.
Along the Atlantic Seaboard and within the City Bowl area, apartment prices literally run the full gamut, according to Hajec. “Prices range from ‘micro units’ in Cape Town’s CBD and Sea Point, which are priced from around R1,2million on average for around 30m2 of space that can be likened to a comfortable but by no means oversized hotel room, to super luxury penthouse units of 300m2 and more which can run upwards of R25million with the sky being the limit.”
He points to an example of an R18million, 300m2 penthouse unit in Fresnaye, which is spread over three levels, has breath-taking sea and mountain views and its own private elevator. “There are also many examples of R2,8million to R4,5million more ‘affordable’ apartments to be found in Gardens, Tamboerskloof, Oranjezict and Vredehoek, that offer a middle class professional a place to hang their hat offering anywhere from 95m2 -175m2 of space. The rule of thumb is the older the building generally the more affordable per square metre, but this is not always the case,” Hajec says.
What buyers in Strand and Somerset West should look for
In both Strand and Somerset West, the number one thing that buyers should look out for when searching for the perfect apartment to purchase is the overall upkeep of the building as well as ensuring that the body corporate has healthy financials. Croeser says that this is because both the general state of the building as well as the financial standing of the body corporate will impact on levies and special levies as well as the future growth potential of the apartment.
Hajec says that in general price is typically the most important factor that influences buying decisions, closely followed by position.
“However,” he says “on the Atlantic Seaboard there can be an exception where price is far less of a deal breaker than the view or position. Other location factors, like proximity to the beach and amenities, as well as shelter from the wind are also important ones for buyers to take note of.”