Picture: THINKSTOCK
Picture: THINKSTOCK

CAPE Town has received a lot of positive international media attention of late and the appetite to live in the Mother City is growing, leaving developers in a quandary as they look to meet demand.

Last month, Cape Town was named the top holiday destination for this year by British newspaper The Guardian and the US’s New York Times. The city holds the title of World Design Capital 2014, which it will pass on to Taipei in 2016, and British magazine Esquire last year also praised Cape Town, recommending British tourists visit the city’s Rose Terrace Bistro and even its lower-key restaurants, including The Dog’s Bollocks, a gourmet hamburger restaurant.

Aubrey Miller, CEO of Sealedbid.co.za, an online property tender platform, says more foreigners are buying South African properties but their attention is largely focused on the Western Cape.

"There is an interest from foreigners especially," he says. "Cape Town has for years been attractive because of its natural beauty and beach-front. But it is getting even more attention from buyers following positive media reports."

Estate agent Seeff’s MD for the Atlantic seaboard, city bowl and CBD, Ian Slot, says last year there was a significant spike in property business. "For the first time in years, we have over the past year seen about a 50% hike in foreign buying activity in these seaside areas compared with 2012.

"Most of these sales were cash, bringing direct foreign investment, tax revenue and job growth into the country." He says foreign buyers are showing confidence in the property market, evident from the sales data: 187 properties worth almost R1.725bn were sold to foreigners in 2013 — amounting to some 29% of all buying activity in these areas.

This represents an increase of about 50% in sales volumes and about 120% in rand value compared with 2012, when just over 120 properties worth almost R800m, representing about 20% of all sales, were sold to foreign buyers.

Most sales were for properties below the R10m price mark as foreigners looked for good value.

But Mr Slot notes that 12 properties priced above R20m sold to foreigners, most notably to African buyers who snapped up five properties priced between R20m and R30m. These were concentrated in Camps Bay, Bantry Bay and at the V&A Waterfront.

Other prominent agencies are also seeing foreign demand for Cape Town properties gain momentum. Pam Golding Properties says its international client base expanded last year to include more buyers from the UK and Germany, Nigeria, Ghana, Angola, the Democratic Republic of the Congo and Somalia.

Pam Golding’s MD for the Western Cape metro region, Laurie Wener, says that after six years of bearish conditions in the residential market, it has now entered a rising trend. "Buyer activity has picked up from March to the end of last year. This resulted in reduced stock levels and even stock shortages in high-demand areas, which in turn fuelled capital growth.

"There has also been an upturn in the number of investment buyers and international buyers, indicative of increasingly positive market sentiment," Ms Wener says.

Pam Golding Properties saw a 20% increase in units sold in the Cape Town metropolitan area in the 10 months from March to December last year, selling 1,024 residential properties, up from 853 in the year-earlier period.

Much of the buying was in the apartment market on the Atlantic seaboard and in the city bowl, where the market changed quickly from a marked oversupply to an acute shortage of stock. Demand is now substantially outstripping supply, pushing prices up by as much as 20% in some instances.

Ms Wener says the upturn is a natural move for domestic buyers and a weak rand has given impetus to foreign buyers. "It seems to be a natural progression in a cyclical market after a prolonged period of muted activity. Prices had softened and stock levels increased, creating excellent opportunities for home buyers to achieve sound value for money," she says.

The rand has weakened by more than 13% against the dollar since May last year, when the US Federal Reserve first flagged its plan to ease off on its stimulus programme.

"Coupled with this, sustained low interest rates and improved access to mortgage finance contributed to local buyer activity," Ms Wener says.

Speaking in his personal capacity, Investec property analyst Peter Clark says: "There is good demand in the midprice bracket (R2m-R5m), which remains affordable to young professionals."

Sothebys International Realty CEO Lew Geffen agrees the rand is a big draw but says the fact that Cape Town has marketed itself well has also helped. " I think foreigners want to live in Cape Town during holidays. The city is seen as a tourist destination now more than ever, with its night life, restaurants and functioning transport," he says.