Property price boom

FNB statistics have shown a significant growth in the price of Atlantic Seaboard properties in the past year, with agencies such as Seeff noting that the rental market in this area is also doing very well, particularly in the R20 000 to R30 000 a month bracket. A suite at this Camps Bay property is one such example as it comes with a monthly rent of R30 000.

While property values may be going from strength to strength on the Atlantic Seaboard, not everyone thinks this is a good thing.

According to the latest statistics from First National Bank (FNB), property prices on the Atlantic Seaboard increased by almost 23 percent in the past year, while prices in the City bowl have increased by just over 20 percent and in Salt River, by 16 percent.

A recently issued press release, Seeff Atlantic Seaboard also said that rentals in the area were showing signs of growth, with the greatest demand in the R20 000 to
R30 000 a month range, generally for two- and three-bedroomed apartments.

Seeff said it had also noted “an upsurge in the demand for rentals in the R40 000 to R55 000 a month range” and that the short-term market had seen “tremendous growth”, with landlords achieving anything upwards of R1 000 a day in Sea Point to R5 000 to R6 000 a day on average.

Gavin Silber, who is an urban planner and housing activist, warned of possible negative implications of this increase in value.

“Rising property values leads to landowners raising rents. We are already seeing the implications of this in places like Sea Point, Woodstock and Salt River.

The median rental for a one-bedroom apartment on the Atlantic Seaboard is R12 000 – roughly equivalent to the totality of income for the average Cape Town household,” said Mr Silber.

“What’s happening in Cape Town is unique not only to South Africa but globally. Last year Knight Frank ranked Cape Town third in the world – behind Vancouver and Shanghai – for property price appreciation.

“While this may be to the financial benefit of a wealthy minority fortunate enough to own property, the majority of Capetonians are increasingly unable to find a home without being massively rent or debt burdened, or having to move further away from work opportunities and amenities. This entrenches apartheid patterns of spatial and income inequality,” said Mr Silber.

Arguing for the regulation of the market, Mr Silber said some steps that could be taken included taking action to prevent homes sitting vacant by introducing a 15% tax on foreign purchases, a system being practised in the Canadian city of Vancouver.

Other options, he said, would be introducing a second-home tax for foreigners and South Africans; using publicly-owned sites for social housing, implementing the Rental Housing Amendment Bill as well as obligating developers to include affordable units in new developments.

Jared Rossouw, co-director of Ndifuna Ukwazi, said property price hikes and displacement go hand in hand. “It removes significant housing stock from the local market and makes it exclusively available to the super wealthy and asset management companies. It puts downwards pressure on the whole housing market, forcing up prices across the inner city as middle class residents move into formerly working class neighbourhoods, in turn driving up prices there.

“As poor and working class suburbs come under pressure, the rising property prices mean landlords expect rentals to keep up with the market every year and tenants must find the money to pay a 10 or 20% increase. Others are selling to developers who evict tenants and build exclusive apartments,” said Mr Rossouw.

He added: “Poor and working class people already cannot afford to rent in the inner-city. Those that do, get by through sub-letting from slum lords or by living with employers, in store rooms and basements. You only need walk around De Waterkant at night to understand how a once vibrant neighbourhood gets bought out by big money, polished up and ultimately left empty, void of life and community.

“Houses are not homes here, they are line items on the balance sheets of asset managers and the super wealthy.”

Gary Freeman, who is one of the partners at Homes which is based in Sea Point, said he doubted the accuracy of the statistics. “I think the market is a strong place but not 20% per annum strong.”

He said sometimes new developments on the Atlantic Seaboard asked for “silly prices” but that they were hardly ever sold at the asking price.

Mr Freeman, however, disagreed that market regulation was the way to go. “I don’t think you will get developers investing in the same way. The market has to establish itself without interference,” he said.

Asked about foreign property ownership on the seaboard, Ian Slot, managing director of Seeff Atlantic Seaboard, said it was important to realise that not all buyers in the area were foreigners.

In fact, he said, the most expensive property in the country at the time was sold by Seeff to a South African. “The problem of affordable housing is something which must be addressed very soon and I feel strongly about this.”

He said that he liked the idea of linking developments to social upliftment projects.

John Loos, who is a household and property sector strategist for FNB, told the Atlantic Sun that the increase in prices was telling a story, but he too didn’t believe that market regulation was the way to go. “I don’t think you should regulate prices but rather look at how you design cities.

“In Cape Town there is the question of land scarcity.”

He said part of the solution was investing in places like Khayelitsha and the Cape Flats which would see more economic opportunities in these areas. Another vital component, said Mr Loos, was a well functioning public transport system.

“While areas around the mountain, especially the City Bowl and Atlantic Seaboard, are currently experiencing something of a ‘golden era’, ultimately their lack of supply and exorbitant house price levels (by SA standards) can create problems for them in terms of making it tough for certain very important professionals, such as teachers, nurses and academics, to live or work in such areas,” Mr Loos noted.

“That can ultimately pose a threat to the standard of certain important services in such areas. The answer is twofold. Firstly, it is important for Cape Town to achieve a high quality public transport solution so as to ease its mounting traffic congestion issue.

“But secondly, shifting a greater portion of economic activity to more de-centralised business nodes in the likes of the northern suburbs as well as to previously neglected areas such as the Cape Flats, is probably also desirable.”

Asked about market regulation, Brett Herron, the City’s mayoral committee member for transport and urban development, said: “We live in a constitutional democracy which protects the rights of property owners.

“Those owners are entitled to extract the value of their properties and cash in on their property investment, if they so choose. This is one of the cornerstones of growing and supporting our economy. Besides which there is no lawful tool available to any sphere of government to place any restrictions on property transactions.”

He added that the City would be “driving and championing a social housing agenda for the Cape Town central business district (CBD), Woodstock and Salt River area”.

“There are a number of social housing projects in the pipeline that should come to fruition in the coming months and years,” he said.

“Despite my frustration with the slow pace of realisation – a product, partially, of the complex social housing subsidy regime – I am hopeful that the projects we have been working on and are planning will become visible in the next few months when we break ground.

“The projects currently on the table could yield a number of affordable housing opportunities in and around the city centre, in Woodstock and Salt River. This is a good start.”