What comes to mind when you hear the phrase “Cape Town properties”? You probably think of adjectives like extravagant, luxurious, stylish … and ludicrously expensive.

As residents know, owning or renting property in the Mother City can be a pricey endeavour as it takes a lot out of your wallet and more.

However, for the first time in seven years, rental prices are starting to get cheaper.

That sounds great, but why the sudden dip in prices?

Realtors have started to notice a shift to an oversupplied rental market in Cape Town. Grant Rea, a residential sales and letting specialist at Remax Cape Town, spoke to Business Insider SA:

As a whole, we noticed a significant shift occur from around October 2017 that saw landlords facing vacancies for the first time in years.

Previously, the demand was always significant enough to ensure each property found a great tenant.

Rea also said there’s been a drop in the average gross yields for realtors, going from 6% down to between 4,5% and 5,5%. He believes the completion of several new developments within the Cape Town City Bowl has led to the rental market becoming oversupplied:

This problem will persist for the next two years or so as new developments are coming online now, with as many as 35 approved developments and blocks nearing completion.

A problem for Rea, maybe, but for property-seekers, it’s a small victory of sorts.

Nonetheless, the Cape Town property market is straining under the pressure:

John Loos, household and property sector strategist at FNB Home Finance, says Cape Town’s property market has shown signs of deterioration after outperforming the rest of South Africa for ten years.

“[Cape Town property prices] have slowed down especially at the very high-income level, with the slowest price growth on the Atlantic Seaboard Seaboard, while the City Bowl is slowing steadily too.”

“Comparatively ‘affordable’ suburbs on the Cape Flats have seen major property price growth, while more affordable suburban areas to the North also hold up better, indicating a search for relatively affordable properties.”

FNB’s latest property barometer, released in May, showed that Atlantic Seaboard property prices saw annual growth of 2,5% in the first quarter of 2018, compared to 27,5% in 2016.

Eish, only 2,5%? That’s a tiny little figure right there.

Loos claims slow in-migration from other parts of South Africa into the Western Cape and exorbitant prices are to blame for these lacklustre statistics.

He also reckons the drought had a lesser impact on property prices, aside from negatively impacting the Western Cape economy in general.

Either way, the Cape Town property market is feeling the pinch for the first time in a while.

[source:businessinsider]