Semigration Windfall for Cape Investors

A unique combination of political, geographic and technological factors has created a South African socio-economic phenomenon of unexpected proportions. The trend for people to ‘migrate’ internally by moving from one province to another has long been a feature of South African life, and one that for decades has seen a net movement of skills and wealth to Gauteng, the financial powerhouse of the country.

Now however, we are witnessing a dramatic reversal of that trend, as more and more affluent South Africans from inland are moving to coastal areas in search of a better lifestyle.

This trend has been dramatically accelerated by the post-Covid remote working factor. The pandemic lockdown forced employees and business owners to use digital technology to work from home, and created a sea-change in corporate culture.

While some companies have subsequently adopted a ‘back to the office’ policy, many others have opted to continue with a remote working or hybrid approach. The result of these various factors is a substantial influx of skills and wealth to Cape Town and smaller towns in the Western Cape.

“The Western Cape was the primary beneficiary of the post-hard lockdown shifts in buying patterns, with its share of home sales rising from a low of almost 21% in mid-2020 to almost 27% by late 2021,” Dr Andrew Golding of the Pam Golding Property Group commented recently.

Western Cape’s Residential Development Boom

This view is strongly supported by statistics from the authoritative Lightstone website, which shows that 2021 price growth was higher in the coastal areas compared to the rest of the country, with an increase of 6.1% on the coast compared to 4.9% in the inland regions.

This is also clear from Stats SA’s private sector building report for September 2022, demonstrating that while demand in Gauteng is declining, the Western Cape is experiencing a boom in demand for residential building developments.

Building plans passed for residential developments in the Western Cape have increased by 22.2% year-on-year to a value of R15.4 billion in 2022, while completed developments over the same period increased by 21.6% to the value of R9.2 billion.

In Gauteng, however, In the same period, residential development building plans passed decreased by 13.5% year-on-year, from a value of R16.2 billion in 2021 to R14.1 billion in 2022. And completed residential projects in the province fell by 6.1% from R9.4 billion in 2021 to R8.8 billion in 2022.

So the semigration of skills and capital to the Western Cape is real, substantial, and unlikely to slow down any time soon. If anything, we are likely to see an increase in this dynamic, as higher revenue for municipalities in Western Cape towns and cities is used to improve service delivery, thus increasing the relative desirability of these areas over towns and cities inland.

Higher Rentals and Capital Growth in Cape Areas

What does this mean for Cape property investors? Firstly, rental demand is going to increase faster here than in other parts of the country. Secondly, house price growth is going to grow faster in the Western Cape owing to increased demand. In fact, we are currently seeing this counter-cyclical effect keep capital appreciation positive in the Cape, while in other parts of the country this critical metric is actually falling below the inflation rate.

So, in a turbulent and uncertain global economy, investment in Cape real estate is emerging as an excellent prospect, combining as it does both rental income and capital growth. And of course, a major advantage of buying into an off-plan development is the capital growth before transfer that one can expect in a buoyant market.

Obviously, due diligence must be applied. In general, when looking for a good buy-to-let investment, the exact location needs to be carefully selected. Here factors like access to amenities, natural resources, schools and shops are all key. And then there are other specific development factors, such as the appeal of the architecture and the interior design to the market, along with contemporary lifestyle features such as good security, access to transport, excellent connectivity and attractive leisure areas, such as co-working areas, pool decks and braai areas.

That’s a lot to take into account, so a canny investor would do well to piggyback on the expertise of experienced developers, such as Signatura, whose entire professional focus is to conceive and design developments that tick all of these boxes – and who have an outstanding track record of successful developments to their name.

Signatura’s current and upcoming developments in Cape Town and in smaller towns and cities in the Garden Route, George, Mossel Bay and Knysna, are all ideally placed to benefit from the semigration trend, as more and more wealthy South Africans look for homes in the more tranquil, better managed and scenically stunning coastal areas our country is blessed with. For an overview of our current property investment opportunities, visit our NOW SELLING and COMING SOON website pages.