South African Semigration Trends Fueling Cape Town Property Values & Rentals

Helderberg Moutain Somerset West

The Helderberg Mountain in Somerset West. The area has welcomed a significant number of new residents from Gauteng in recent years. Image credit – Wikimedia Commons

A number of families have relocated to Cape Town from other South African provinces in recent years, with lifestyle and governance noted as primary motivating factors. The trend is supported by the Cape Town property market continuously outperforming that of the rest of the country, with Lightstone reporting a strong upward growth trend in both average property values and rentals estimated to be 5% higher than the national average. These well-documented trends are showing no signs of a slow-down, and is further fueled by South Africa’s inward migration patterns (or popularly known as ‘semigration’) to the Western Cape.

With the Cape’s coastline and mountain ranges limiting future development and supply, the continuous upward growth trend in property values and rentals will likely maintain its momentum. Practically speaking, it means that newcomers from the North have to trade in their extra reception room, double volume entrance and yards of garden for a more modest Cape Vernacular townhouse lifestyle near the sea or among the vines. What implications do these semigration patterns and related property trends hold for the Western Cape?

1. Detailing South Africa’s inward migration trends

The Department of Science and Technology in association with the CSIR published the map below, detailing internal migration flows in South Africa based on tracking the movement of registered voters.

Inward Migration in South Africa Map

Inward Migration in South Africa. Source: Department of Science and Technology and the CSIR. Credit: A le Roux & A Loots.

 

From the map, it is evident that the most significant movement of people has taken place between metropolitan areas with a strong focus on the extended Gauteng region and the Western Cape. Where Gauteng appears to be receiving the most new residents from surrounding inland provinces and Kwazulu-Natal, the Western Cape is accommodating residents from three major metropolitan areas being the Eastern Cape, Kwazulu-Natal and (most significantly) Gauteng. The Cape Metropolitan area is therefore under significant pressure in terms of population density as it continues to welcome new residents.

2. Semigration and working trends increases demand for Cape Town Commercial Property and Serviced Office solutions

Serviced Office Space Cape Town

The demand for serviced office solutions and co-working environments in Cape Town is set to increase in 2017 as companies start to accommodate employees who have relocated their primary residence to the Cape. There are as many as 13 Serviced Office providers in Cape Town.

 

Gauteng remains South Africa’s economic hub, with a significant number of corporates having their primary base in either Johannesburg or Pretoria. However, advances in technology and modern working practices are enabling employees to work from almost anywhere. These trends have enabled many professionals to relocate their primary residence from inland provinces to locations more conducive with their lifestyle priorities. Employers have also become more accommodating of the lifestyle needs of their star employees in recent years in efforts of promoting employee retention and satisfaction.

This trend is particularly evident in the Cape Winelands property market, which has welcomed a significant number of new families from Gauteng. Moneyweb supports this trend, stating that “Somerset West must be the largest retirement village in the country. But in recent years the nature of this trend has changed. More and more younger families are packing their bags and heading south, for a variety of reasons.” Other popular areas for new residents include the Atlantic Seaboard, Constantia, Durbanville, Stellenbosch and Paarl.

Modern working practices and technology have furthermore allowed employees to avoid the costly and frequent travel to headquarters up North. As a result, companies have started investing into smaller, premium supporting offices or serviced office solutions in Cape Town. Therefore, the skilled movement of labour from South Africa’s traditional economic hub into the Western Cape has seen an increased investment into commercial property solutions to support primary operations elsewhere. Our latest office market report published in association with JLL supports the trend, with the Cape Town office market having an overall vacancy rate of 7,6% compared to the national average of 10,7%

3. Increased congestion forces Cape Town property developers to focus on densification

header-image-executive-mayor

September 2016 – Honourable Executive Mayor of Cape Town Patricia de Lille addressing the South African Property Owners Association (SAPOA) on key economic development factors influencing the Western Cape, and its relevance to property market. Credit – SAPOA

 

It is no secret that Cape Town traffic can be as bad as its infamous South Easterly Wind, with TomTom rating the Mother City as most congested city in South Africa. The premium on residential property in the City Bowl, Atlantic Seaboard and Woodstock is partly driven by the need for a convenient lifestyle close to work and major amenities outside of congestion. A 70m2 two bedroom apartment in the mountainside suburbs of Vredehoek, Oranjezicht, Higgoval and Tamboerskloof overlooking the CBD can easily set one back between R2,5 and R3,5 million. It is young, affluent professionals in particular who are willing to pay the premium for the Mother City’s compact and convenient lifestyle.

Congestion in Cape Town was noted in a recent talk by Honourable Executive Mayor Patricia De Lille addressing the South African Property Owners Association (SAPOA) on key Economic Development factors for the province. The City has reportedly allocated R750 million to address the problem, which includes plans to complete the elevated highway and the further roll-out of the MyCiti bus system. The mayor also noted that the City’s infrastructure plans is proposed to support the many new anticipated residents in years to come. However, there is still no mention on further investment into rail. Therefore, a significant macroeconomic impact on the province will be local government’s focus on densification and inclusive, mixed-use developments closer to main commercial nodes. The implications for property developers are that the city will favour new developments residing on existing transport corridors, with ‘greenfield developments’ being discouraged in order to achieve social and infrastructure objectives

In the short-term, the rate at which Cape Town welcomes new residents outstrips the City’s capacity to roll out infrastructure to support demand. Expect more time in your car or transport, increased parking fees and a rising premium on sectional title living close to main commercial nodes such as the CBD, Seapoint, Claremont, Century City and The V&A Waterfront.

 

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