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Central City property still a good investment

Central City property still a good investment

30 August 2021

The Cape Town CBD remains a prominent investment destination in spite of Covid-19 but buying the right property at the right price point is key, says Michael Bauer, managing director of SAProperty.com and the newest board member of the Cape Town Central City Improvement District (CCID).

Bauer, who has more than 20 years’ experience in the property industry, is keen to promote the flair of downtown Cape Town and to amplify its reputation in a bid to help foster faster property market recovery, which he believes could take anything up to three years.

Commenting on the pandemic’s impact on the South African property scene, he says it’s been “interesting”.


The value of Central City property, according to the City of Cape Town, is R43.8 billion.

THE OFFICE WILL BOUNCE BACK

From a commercial perspective, Bauer says that in the short term, there will be a market contraction as people struggle to fill offices.

However, he believes the office will bounce back, with hybrid arrangements and “hot-desk” configurations. This means they may get smaller and be used more efficiently, but they won’t die out. “Prior to the pandemic, we were already seeing less big-office use. Over time, a previously ‘pure’ office building may become a mixed-use development. In doing so, it becomes prime residential property as well.”

Bauer says that space and land are very expensive. “From a property price and density perspective, we’re heading in the direction of London. But we’re not at the same density as Hong Kong or New York, where it’s acceptable to have a 32 square metre apartment for a family of four. We do have a lot of studio and bachelor pads being built, but they’re often for Airbnb or student use.”

THE TIME IS RIGHT

Bauer believes certain properties – be they small individual units or buildings – in the Central City, especially if they’re at the right price point, are good investments right now.

He singles out residential properties under the R1.5 million price point and buildings that can be converted for multi-purpose use and that have parking facilities as “good buys”, especially if there is parking as “in the CBD, parking comes at a premium”.

Bauer, who has worked for several real estate and construction companies in Germany and South Africa, says it’s impossible to predict the future with all the current uncertainty, but the remaining months of 2021 are going to be rocky. “We were hoping the interest rate would be further reduced, but even if this happens, I don’t think it’ll be enough to stimulate the market. Ultimately, many different sectors of the economy have been impacted, which jeopardises jobs and reduces people’s chances of having loan applications accepted.”


Church Square, surrounded by residential buildings, in the CBD.

RESIDENTIAL BOOM

The residential market hasn’t been broken – It has actually boomed, he notes. After lockdown Level 5 was lifted, estate agencies experienced a “mini-boom” from May to July 2020. “Many of us had our best quarters in the last 10 years, for reasons we still don’t fully understand. The low interest rates played a part. People in industries that were less affected by the pandemic could get 100 % bonds, with some interest rates below prime granted. If you structure your home loan over 30 years, you could end up with a good property at affordable payment rates.”

Driving business back into town is a focus for him as part of his new role as a CCID board member. “The city centre offers a very attractive lifestyle, which we need to show to the world. Once more tenants and users come back into the area, the investment potential will increase. With more people working remotely, we have seen less foot traffic to the CBD. We are actively encouraging people to come back to town – and to come back to work as soon as we have a handle on this pandemic.”

IMAGES: CCID, Ed Suter, dhk Architects

Tags: Michael Bauer Cape Town CBD property investment downtown Cape Town property investment