New CCID Report Shows Residential Property Values in the CBD Remain Strong, Despite Covid
Despite the strain caused by the 2020 COVID lockdowns, residential property developments dominated in the CBD, and the economy managed to remain somewhat stable. According to the State of Cape Town Central City Report, The City of Cape Town placed the official nominal value of all property at R43.8 billion, with at least 31 additional developments worth more than R6.9 billion in the pipeline.
According to CCID board chairperson Rob Kane, “The Cape Town CBD once again proved its resilience in a very tough year. While some businesses have closed, many others have survived the first Covid year and it is very encouraging to note that investor and property development interest in the city centre remains steady.”
This is backed up by data from the State of Cape Town Central City Report, the ninth such annual report to be published by the Cape Town Central City Improvement District (CCID).
In 2020, there were 31 new developments in the CBD – either planned or proposed, currently under construction or recently completed.
- Two were proposed, with a conservatively estimated value of R860m
- Nine were in the planning phase, with a conservatively estimated value of R2bn
- 15 were under construction, with a conservatively estimated value of R2.9bn
- Five were completed, with a conservatively estimated value of R972m
Additionally, the redevelopment of commercial building One Thibault into a mixed-use office and residential complex (worth R500 million) has proven the trend of repurposing commercial buildings since the study was released.
According to Kane, the conversion of commercial buildings into mixed-use or residential complexes on an ongoing basis shows that the commercial property market remains resilient in 2021. “This indicates a flexibility in the sector,” said Kane.
Top Property Trends in Cape Town
Despite the massive strain faced by the construction industry in 2020, and the devastating impact of Covid-19 on most industries, the Cape Town Central City remained a viable commercial and residential property investment node in 2020, with a total projected value of developments completed of R972 million.
These were the top trends as highlighted by the State of Cape Town Central City Report
Regardless of the impacts of Covid-19 on the economy, data on the residential property sector reveals that low interest rates and innovative offerings continue to pique investor interest in the idea of living in a prosperous downtown.
According to Kane, “Developers have responded with accommodation offering flexibility, ease of use and affordability.”
In 2020, at least nine of the 15 buildings under construction in the CBD were residential developments worth R2.07 billion.
In 2020, the median price of an apartment sold in Central City was R1.65 million, which was lower than the R1.8 million median price in 2019. The price range of R20,000-R29,999/m2 saw the most sales.
“The distribution of sales across the various price bands shifted from the most being recorded in the R30,000-R39,999/m² category in both 2018 and 2019 to the lower band in 2020. This can be attributed to the price correction in the national residential housing market in recent years which has brought house prices in line with prevailing economic realities,” Kane said.
The R1.65 million median price for sectional title units in 2020 indicates an 8.3 percent decrease from the R1.8 million median price attained in 2019. In 2020, 130 apartments were sold, down from 174 the year before.
“There was a significant increase in available rental stock in 2020 as repeated lockdowns and subsequent travel restrictions impacted the tourism and eventing industry. This prompted numerous units, which were previously available as short-term lets such as AirBnB, being added to the long-term rental pool,” said Kane.
Due to the poor economy and the Covid-19 factor, flexible residential living alternatives rose to prominence in 2019, but were solidified in 2020. Property developers remained flexible in their approach, with many providing buyers and investors a choice to suit their demands.
Only a small percentage of new projects are solely residential or commercial. In general, “mixed-use” refers to a building with some commercial activity on the street level or within the structure itself.
Nine of the 15 projects scheduled for completion in 2020 are exclusively residential, while three are “mixed-use.”
In 2020, The Harri, a R70 million residential property development in the East City with 48 studios and lofts, joined a spate of other CBD buildings, including WINKS (Foreshore), Urban Oasis, and BlackBrick Cape Town, in taking the aparthotel path.
The Onyx and the Radisson Blu Hotel & Residence (both on the Foreshore), as well as the Pepperclub, are other well-known CBD projects that are already functioning as aparthotels.
Aparthotels provide property owners access to both the real estate and the hospitality markets. They can opt to live in their apartment when they need it or want to, and then add it to an existing pool of units to rent it out when they don’t.
The club idea, in which property investors not only have access to co-living and co-working facilities but also become members of the development’s “club,” was one of the more fascinating trends to emerge in 2020.
BlackBrick Cape Town in Precinct 2 and Neighbourgood East City and Neighbourgood Reserve (the latter under construction in 2020 and the former planned) were the first developments in the Cape Town Central City to start this trend.
BlackBrick Cape Town combines three distinct uses: residential, hospitality, and club membership privileges, which include access to a rooftop clubhouse and bar, as well as offices, a boardroom, and a café. Apartment sizes range from 23 m2 to 36 m2, with prices starting at R895,000.
Members may rent fully furnished co-living apartments with set monthly prices and variable lease terms (from R5,950 to R10,950 per month) with access to common spaces, free commercial-grade WiFi, and shared work and cooking facilities. They also get access to facilities at other buildings in the portfolio in Cape Town, as well as organized community activities.
Despite Covid’s devastation of the tourist industry and the resulting impact on the Central City’s visitor and event economies, most Central City hotels went all out in 2020 to attract domestic visitors. The R400 million Hotel Sky construction and the Old Bank Hotel were two of the hotels planned for 2020. In 2020, two aparthotels were completed: WINK Foreshore (worth R75 million) and Urban Oasis in the East City.
The increase in property value from R30.6 billion in 2016/2017 to R43.8 billion in 2019/2019 was the most significant signal of investor confidence in Cape Town Central City.