Western Cape property market keeps outperforming

by | Jan 2, 2024

Residential properties on the coast are the main attractions, with a 22% annual growth, but the industrial sector has seen growth too, increasing by 6% quarterly

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In a trend dubbed “semigration,” the exodus from Gauteng to coastal regions, particularly in the Western Cape, is reshaping South Africa’s real estate landscape, leading to a scarcity of housing units in the picturesque seaside towns such as Knysna and Plettenberg Bay.

This migration phenomenon, driven by the pursuit of enhanced services, safety, and security, is expected to exert sustained pressure on coastal property markets in the coming year.

Cape Town’s industrial property market is also a stand-out as a consistent performer, recording nominal rental growth of 6% for the fourth quarter of 2023. The city’s strategic location, well-maintained infrastructure, and stable supply of electricity contribute to its appeal for businesses, driving demand for industrial properties.

Sotheby’s International Realty underscores the substantial growth anticipated in coastal areas in 2024, fueled by semigration. Key regions, including Plettenberg Bay, Knysna, and areas north of Durban and along the Cape west coast, are witnessing increased demand, resulting in stock shortages in both rental and sales markets. Building plans for residential developments in the Western Cape surged by 22.2% year on year, reaching R15.4 billion last year, according to Stats SA data.

The Southern suburbs of Cape Town, in particular, have experienced a surge in demand, resulting in reduced time properties spend on the market. Entry- to mid-level homes are being swiftly snapped up, signaling a robust market. Sotheby’s anticipates this momentum to extend to holiday towns in the Eastern Cape, such as St Francis Bay and Port Alfred, as well as other commutable areas from Cape Town.

While Gauteng dominates the entry-level market, the middle and upper markets grapple with challenges, with semigration and emigration acting as key drivers. Seeff Property Group highlights the strength of the luxury sector, particularly in the Western Cape. Notably, nine of South Africa’s ten most expensive suburbs are in Cape Town, with semigration expected to bolster this market further.

Despite the surge in demand for coastal mansions, the South African property market remains in a prolonged buyers’ market due to high-interest rates, diminishing buying power, and escalating living costs. Only Realty Property Group, notes a shift towards renting over buying, emphasizing the current opportunities for real property deals at the lowest levels in a decade.

Pam Golding Properties also anticipates an improvement in key residential property metrics in 2024. The expected downward trend in interest rates and potential relief from load-shedding are likely to contribute to a more positive outlook for the property market. In conclusion, the semigration phenomenon is reshaping South Africa’s property landscape, with coastal regions emerging as hotspots for investment. As the market adapts to evolving trends, both residential and industrial sectors are poised for transformations that will shape the country’s property dynamics in the coming year.

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