Where to invest in property on Cape Town’s Atlantic Seaboard

Where to invest in property on Cape Town’s Atlantic Seaboard

Category Property News

A shift in the seemingly bullet-proof Atlantic Seaboard rental market precipitated a steady rise in stock levels and vacancies for the first time in almost a decade, but agents are reporting signs of recovery, especially in the lower- to mid-level segments.

Lisa Hendricks, Rental Specialist for Lew Geffen Sotheby’s International Realty on the Atlantic Seaboard, attributes this to several key factors, including the fact that many landlords have adjusted their rental expectations to be in line with current market conditions.

“Owners are understandably frustrated that they cannot achieve the same rental prices they did last year, but they are starting to realise that the market isn’t bouncing back overnight and that its far more costly to have an empty property than a good tenant at a slightly lower rental,” says Hendricks.

“Because of its prime location in close proximity to the CBD and an array of world-class amenities, there will always be a demand for rental homes in the area, so realistically-priced properties will almost always find a tenant.”

Debra Levin, fellow Rental Specialist, says this is especially true of the entry to middle markets.

“At least 70% of the homes we rented out this year are in Sea Point - it offers a wide variety of more accessibly-priced freestanding and sectional title options, most of which are very conveniently situated within walking distance of an array of amenities,” says Levin.

“Sea Point therefore also offers investment buyers the best returns at the moment as we always have prospective tenants enquiring about rental properties in this area.”

She says another suburb which caters well to both limited and expansive budgets is Mouille Pointwhere one can rent a one bedroom beachfront flat from around R11 000 per month to a luxurious designer apartment in excess of R60 000.

“Mouille Point now also boasts numerous world-class eateries and the seafront has become a popular extension of the Sea Point Promenade that attracts walkers, cyclists and dog lovers to the lawns and paths that hug the coastline, as does the inviting green space that is the new Urban Park,” says Levin.

According to CEO, Brendan Miller, another contributing factor to the higher available stock levels is the fact that many landlords who previously only offered short-term rentals are now seeking long-term tenants.

“Last season was quieter than in previous years as many local tourists who usually come to Cape Town chose other coastal areas because of the water restrictions, and proliferation of Airbnb properties has also resulted in a glut of short-term rental options on the Atlantic Seaboard,” says Miller.

“This is especially true for the high-end properties that benefit predominantly from tourism as many won’t have achieved their summer rentals, and to recoup their losses they have to be entered into the long-term market at very high rentals.”

Miller adds that the dramatic slowing of semigration to Cape Town has also impacted the rental market in the area.

According to Propstats data, rental growth has been steadily decreasing nationally since the first quarter of 2017. At the end of March last year it was a very respectable 7.6%, but within 12 months growth had dipped to 4.1% by the end of March this year. During the same period, the national percentage of tenants in arrears rose from 18.5% to 23.2%.

“In a tough market it’s essential that landlords are negotiable on rentals and annual increases if needs be as creditworthy tenants who pay on time and look after your property are not always easy to come by these days. And, because of the stressful market conditions, tenants should be cognisant of the fact that landlords are clamping down on tenant requirements, and it is therefore becoming harder and harder to secure properties that are within their budgets,” say Hendricks and Levin.

Author: Lew Geffen Sotheby's International Realty