When it comes to prime real estate in South Africa, two world-class cities lead the pack in terms of quality, design, and ultimately – the price of their properties. As estate agents in both Cape Town and Johannesburg focus on attracting top-tier clients, at Jawitz Properties we take a look at the hard facts – and figures – to decide which city is ahead this year.
An old rivalry between two great cities
As two of South Africa’s most iconic cities and the centres of South Africa’s most prosperous provinces, Cape Town and Johannesburg have been known to enjoy competing with each other for the crown of most prestigious city.
While Cape Town offers an incomparable lifestyle in idyllic surroundings, residents of Johannesburg are energised by their city’s high-paced rhythm and financial clout. In truth, both cities have a huge amount to offer to high-end real estate investors – here are some reasons why.
Johannesburg – Africa’s financial hub
South Africa may not be the continent’s biggest economy anymore, but the stability and sophistication of its financial sector is unmatched in Africa.
Many South African banks, investment corporations and large holding companies are headquartered in Johannesburg – making the city vitally important to the economy of both South Africa and the continent as a whole.
Property transactions in Johannesburg worth approximately R13.7 billion were concluded in Johannesburg over the past year – with just over 11 000 properties changing hands. The concentration of wealth in the city continues to drive demand for properties to rent and residential sales, despite a challenging economy.
Cape Town – International jet-set destination
While Johannesburg remains Africa’s premier business city, Cape Town has focused its efforts on climbing the rankings for best tourism destination on earth – with excellent results.
Since 2011, Cape Town has featured prominently on several lists of the world’s best tourist destinations, having been ranked number one by Tripadvisor and Skytrax to name just two. The international interest in holidays and longer-term stays in the mother city have seen property prices soar.
Over the past year, property transactions in Cape Town topped Johannesburg both in volumes and the total annual value. Although only a few hundred more properties were sold in Cape Town than Johannesburg, the total value was an impressive 40% higher at roughly R20 billion. Considering Cape Town’s smaller size and economy, these figures are extremely impressive and bode well for the city’s future.
The Cape Town rental market continued to set it’s own records with demand for luxury properties to rent exceeding demand in peak season. While homes in the Northern and Southern suburbs were attracting rates of R35 000 to R60 000 a month and apartments in the CBD and Atlantic Seaboard R15 000 – R30 000, the luxury suburbs of Fresnaye, Bantry Bay and Clifton saw an increase in long-term rentals and considerably higher rates in the R30 000 to R80 000 bracket.
Looking ahead
The latest property sales figures come at a time when South Africa is facing an uncertain economy, with electricity supply challenges and jittery investors reconsidering their commitments. Many economists are predicting low growth in 2016 and even 2017 – but how will a slow economy affect South Africa’s two premier cities?
Commercial property experts have already sounded the warning bells on office rentals for 2016/17, with a big increase in office space expected in both Johannesburg and Cape Town but weak demand from tenants. The residential property market may not fare as badly – especially in Cape Town where a weak Rand may actually encourage foreign investors to buy or rent at a time when housing stock is hard to come by and the live, work, play lifestyle looks set to become the norm.
A slow economy may also mean that buyers think carefully before committing to a large asset purchase like prime real estate – but there may be a silver lining. Discerning investors may be cautious, but with the right offer and a high-quality property (coupled with professional service from Jawitz Properties) there is nothing preventing a large quantity of premium properties from changing hands over the next few years.
For property investors, this may be an opportunity to invest in a market that has performed extremely well over the past two decades. The question on many investors’ minds is – will Cape Town or Johannesburg weather the storm best?
Cape Town – betting on foreign investment
Since Johannesburg’s property buyers are mostly local while Cape Town benefits from a large number of foreign investors, it’s likely that a weak Rand will keep property sales buoyant in the mother city. The demand for properties to rent looks set to remain strong in Cape Town, offering investors a steady stream of tenants for apartments and homes in the city. Only time will tell which city fares better in 2016.
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