With double-digit growth in 2017, Cape Town’s luxury real estate market is the second-fastest growing in the world. The South African coastal city has long been an economic hub and is now making a name for itself as the real estate market of choice for ultra high net worth individuals (UHNWI) around the globe.
8.5x Growth in Cape Town Compared to Overall PIRI 100 Index
According to Knight Frank’s 2018 Prime International Residential Index (PIRI) 100, which tracks the movement of the world’s luxury residential property markets, Cape Town’s luxury real estate market grew a staggering 19.9% in 2017. Not only did it outperform the city’s wider mainstream market, but its growth has far outpaced the overall index, which increased by just 2.1% this year.
Cape Town’s high growth luxury real estate market has caught the attention of sophisticated investors worldwide. In May 2018, executives from the top 300 Japanese companies visited South Africa to take advantage of prospective investment opportunities. And they’re not the only ones heavily investing in the South African strategy. South African President Cyril Ramaphosa is set to raise $100 billionin new investment capital in just five years.
Cape Town Outperforms 98% of PIRI 100 Cities
Cape Town’s rapid growth in the luxury real estate market has propelled it to the number two spot on the 2018 PIRI 100 Index. The economic hub outperformed a number of other notable cities, including Aspen (19%); Amsterdam (15%); Seoul (13.2%); Frankfurt (12.9%); Seattle (12.2%); Paris (12%); Sydney (10.7%); and Madrid (10.6%).
In fact, only the Chinese city of Guangzhou reported higher growth. Of the 100 cities on the index, two thirds reported flat or positive annual price growth in 2017, while only 11 cities, including Cape Town, enjoyed double-digit growth. Cape Town’s growth is virtually unmatched, making it an excellent investment for individuals who want the best return on their investment.
One of the most notable opportunities in Cape Town’s high growth luxury real estate market is the city’s relative value compared to other countries. In cities like Hong Kong, New York, and London, a million dollars won’t give homebuyers much: a reported 22, 25, and 28 square meters of prime property, respectively. In Cape Town, however, one million dollars will net buyers 127 square meters—about five times more than its foreign counterparts. With relatively less costs, high net worth and ultra high net worth individuals are coming here to get more for their dollar.
The Economics Behind the Boom
The mechanics of supply and demand helped fuel the recent market boom in Cape Town. On the supply side, there is a shortage of high-quality new and existing properties. Together, the coastline and iconic mountain range have made it challenging for investors to secure prime real estate in what has become an extremely competitive marketplace. Only large, well-established players are able to successfully navigate the landscape to capitalize on double-digit growth opportunities.
At the same time, demand is booming with both foreign and domestic buyers scrambling to get a piece of the pie. Specifically, Knight Franknoted that the area near Table Mountain, including the Atlantic Seaboard and City Bowl, had attracted a strong inward migration. While many South Africans are choosing to move to Cape Town, it’s also an in-demand city for the international community.
Since 2015, according to FIN24, “Cape Town has set South African records for both the highest-ever sale price achieved for a residential home - R290m for a house in Bantry Bay – as well as the highest-ever rental price - R450 000 a month for an estate in Constantia.”
A Richly Diverse Coastal Hub
Cape Town is South Africa’s legislative capital and the second-most populous urban area in the country. The lush coastal city is a showcase of biodiversity (some of the greatest in the world) and a growing tech and startup community, making it a fresh, innovative, and welcoming environment for both international and local buyers alike.
According to Deon de Klerk, head of wealth for Africa regions at Standard Bank, “Cape Town is fast becoming a truly global holiday destination and an increasingly desirable residential address for [South Africa]’s high net worth individuals (HNWIs), as well as those from abroad.” In fact, the city was recently dubbedthe Monaco of the South.
Investing in Cape Town
Despite marginal growth from many cities on the 2018 PIRI 100 Index, Cape Town is proving to be a dominant region for high-growth property investments. Rich in natural resources and economic opportunities, yet without the high costs associated with places like New York, Seoul, and Paris, it’s a no brainer that investors are looking to this South African hub.
With demand from savvy investors accelerating, Cape Town’s high-growth real estate investments are a smart choice for people who seek unique investments with high upside potential. We are excited to be leading exclusive co-investments into South African developments.
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