The gap between Cape Town and Joburg property prices is widening, largely due to perceptions of better public administration and infrastructure as well as political stability in the Mother City, according to new data from the FNB property barometer.
Among those who have ditched Joburg for the Western Cape is property investor Heather Woodgate, who manages properties for some Joburg investors. She moved to Cape Town in January.
“As a property investor, you follow the demand trend, which is set to continue in the Western Cape. People are searching for quality of life and here you get higher salaries, more quality time, better scenery, a safer environment, good schools and good hospitals,” she said.
“This led all our 12 shareholders to agree to disinvest from Joburg and move our funds to Cape Town — because of the widening gap between the two cities and the poor service delivery and deteriorating quality of living in Joburg.”
She cited council billing issues “like a false meter reading unresolved for more than a year” and skyrocketing rates in contrast to “good governance” in Cape Town, among other reasons.
“The unstable electricity supply is disruptive — in our buildings in Linden and Emmarentia, we’ve had to contend with stolen cables leading to days without electricity, and then failing, old infrastructure that trips repeatedly when power is restored.
“Homeless people sleep under the balconies of our flats, creating noise that upsets the tenants, so there have been no rental increases there for years now. It's a different story in Cape Town where they stick to load-shedding times and fix electricity problems, even on a weekend. We have a small flat in Sea Point, and the return there has beaten all the properties we have in Joburg,” said Woodgate.
“We recently sold our investment property in Magaliessig, which showed a modest 3% a year capital growth increase in the past 10 years, after each tenant left after just one year due to high utility costs. We also sold our building in Emmarentia but we can’t lodge the transfer with the deeds office as we have been unable to receive rates clearance figures from the council.”
Properties are also taking longer to sell in Joburg, with the FNB property barometer for the second quarter of 2023 listing the average time on the market for a house as 13 weeks and four days. This is higher than the national average of 12 weeks, one day, with the Cape Town average at eight weeks and six days. This is markedly different to 2018, when the average selling times were 15 weeks and six days for Cape Town and 15 weeks and five days for Joburg.
“The divergence began sometime towards the beginning of 2015, when Cape Town experienced a house price boom,” said senior economist Siphamandla Mkhwanazi.
“The gap increased to about 20% by the second quarter of 2018 and stayed there until about 2021. Since then, it has increased by another eight percentage points and has been there since the beginning of this year.”
Among the reasons for this, he said, are that Cape Town is the favoured investment destination, has better public administration and infrastructure, and is politically more stable.
“There is greater participation by foreign buyers in Cape Town, especially in affluent suburbs, and there's the long-standing trend of affluent individuals leaving inland regions for the coast,” he said.
He said emigration-triggered property transactions have markedly decelerated, plummeting from a peak of about 18% in 2019 to an average of 9% of overall domestic sales, with semigration emerging as the more prominent trend.
Leadership development practitioner Ann Farndell decided to put her large three-bedroomed Wendywood home on the market in February after her daughter graduated.
“I bought the house in 2019 for R2.7m and spent about R600,000 renovating it,” she said. She listed it for R3.2m but two price drops and three months later she accepted an offer for R2.8m in May.
She said a recent hiking trip to Cape Town had her seriously consider semigrating to the Cape.
“Security is good and the chance to safely head out on the estate biking trails at any time of day or night has big appeal — as does the lock-up-and-go aspect,” Farndell said, adding that a British passport made emigration another option.
A May 2023 cost of living comparison between Cape Town and Joburg by global data crowdsourcing platform Numbeo found that while most living costs — food, eating out, transport and utilities — are higher in Joburg, Cape Town’s property prices are significantly higher.
The report found that rental costs of a three-bedroom unit in the Cape Town city centre were 42.9% higher than a same-size apartment in the Joburg CBD. The gap drops to 20.2% in the suburbs.
An analysis of deeds office data by property agents Seeff shows that in 2022, 241% more properties were sold for above R10m in Cape Town than in Johannesburg.
Mkhwanazi said he believed interest rates had peaked, and while 81% of sellers in the second quarter of this year had been compelled to lower their asking prices, Eastern and Western Cape had been exceptions.
The Eastern Cape, he said, was now the top-performing province with above 6% year-on-year house price growth, having benefited from semigration, shifts in work-from-home lifestyles and living preferences, as well as the relatively lower prices in some coastal suburbs.
Berry Everitt, CEO of the Chas Everitt International Property Group, said the price gap had been compounded in recent years by rising demand from people relocating from Johannesburg to Cape Town and little new development in the Mother City.
“This has worsened a growing stock shortage and the upward pressure on prices, especially in the most sought-after areas.”
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