South Africans flock to Cape Town

Cape Town’s property market continues to outperform the rest of South Africa with house price growth of 8.7% far outpacing the national average of 5.2%, leaving cities like Johannesburg and Durban far behind.

Remarkably, this growth comes during a period when the South African economy is grappling with persistent headwinds.

While other property sectors in the country have struggled, Cape Town’s has thrived, delivering returns that consistently outpace national averages and confounding those who predicted a post-pandemic slowdown.

According to Lightstone, national house prices grew by a respectable 5.2% in the year to January 2025. Properties in the Western Cape, however, surged ahead with 8.7% growth.

This isn’t a new trend. For seven consecutive years, Cape Town’s real estate market outperformed the rest of the country.

FNB’s Property Barometer revealed that coastal properties across South Africa typically command a premium, averaging 5.0% growth compared to 3.7% for inland areas.

Even when compared to other coastal areas, though, Cape Town remains a standout with 6.2% price inflation. This is more than triple Johannesburg’s flatter 1.8% and significantly ahead of Durban’s 1.9%, Lightstone data showed.

Arnold Maritz, Co-Principal for Lew Geffen Sotheby International Realty’s Cape Town Southern Suburbs, said he observes this trend daily.

“According to Stats SA, the Western Cape accounted for 38% of national real estate transaction value last year despite having just 11% of the population.”

“This concentration of capital speaks volumes about where investors are placing their confidence.” The Western Cape has quietly become South Africa’s economic powerhouse, boasting an average household income of R407,000.

This is a staggering R107,000 (35.7%) higher than Gauteng’s R300,000 and nearly 50% above the national average, according to Stats SA’s Quarterly Labour Force Survey.

A booming economy

The Western Cape’s income advantage stems from several structural strengths. The province’s unemployment rate of 23.4%, while still troubling, stands well below the national average.

More importantly, the nature of employment differs markedly. Formal sector jobs in the Western Cape grew by 3.1% in 2024 compared to just 1.2% nationally.

The region’s economic diversity provides further stability. Gauteng’s Economic Development Agency revealed that Johannesburg remains heavily dependent on finance, which contributes 38% of GDP, and manufacturing, which contributes 22%.

On the other hand, Cape Town has cultivated a more balanced economy. Financial services contribute 22% to provincial GDP, but this is complemented by a tech sector growing at 8% annually.

Wesgro and the City of Cape Town’s Green Economy Report also revealed that in 2024 alone, R14.7 billion was invested in the city’s green economy.

This economic vitality acts as a magnet for talent. Stats SA data shows a net migration gain of 92,000 working-age adults to the Western Cape over the past two years.

Around 68% hold tertiary qualifications, with 42% occupying professional or managerial roles. This influx of human capital creates a virtuous cycle, attracting more high-value businesses and further boosting property demand.

The city also benefits from what economists term a “governance dividend”, the tangible advantages of competent local administration.

Water supply reliability stands at 98% compared to 76% nationally.

• Water supply reliability stands at 98% compared to 76% nationally
• Electricity availability reaches 94% versus 68% elsewhere
• Waste collection is 99% in Cape Town against 82% nationally
• Road maintenance stands at 91% versus 63%

These figures translate into real economic value. Due to infrastructure challenges, businesses in Johannesburg spend 18% more on backup power solutions, and transport costs run 22% higher in Gauteng.

Perhaps most tellingly, productivity studies show Cape Town workers delivering 15% higher output per hour, according to the Bureau for Economic Research. This competitive advantage attracts employers and employees alike.

The City of Cape Town’s R12.6 billion infrastructure budget for 2024/25 further demonstrates this commitment to maintaining standards.

With R2.3 billion allocated to alternative energy projects and R4.1 billion for transport upgrades, the municipality continues investing in the foundations that make the city work.

An investor’s haven

Maritz said Cape Town’s property appeal is most evident in its luxury segment. Recently, three residences on Rhodes Drive in Constantia each sold for over R40 million.

Their investment rationale combines expectations of 8-10% annual capital growth, rental yield potential of 4.5-5.5%, and the currency diversification benefits of rand-denominated hard assets.

Perhaps most importantly, investors are betting on Cape Town’s continued ability to outperform other South African cities.

As with any strong market, questions arise about sustainability. However, Maritz said most indicators suggest Cape Town’s growth has firm foundations.

FNB Property Insights report projected 7-9% annual price growth in their base case scenarios, with potential for 10-12% in the prime segment.

The undersupplied market continues to present opportunities, particularly in the Southern Suburbs, where areas like Bishopscourt, Constantia, and Claremont have seen premium property yields of 5.5-6.2%.

“In our office, buyers with budgets exceeding R15 million have become the norm rather than the exception,” Maritz said.

“We repeatedly see clients inquiring about specific properties, only to learn they were sold within days – sometimes hours – of listing. The speed at which quality stock moves in these neighbourhoods is remarkable.”

The growing appetite for secure, luxury residential estates is another notable trend in the Southern Suburbs. “Buyers are drawn to these estates not just for the premium amenities and security, but for the lifestyle they offer.”

“The combination of space, privacy, and proximity to top schools and the CBD creates an irresistible package for high-net-worth individuals, both local and international.”

According to Lightstone, emerging areas like the Northern Suburbs show 12% growth in 2024. Undersupplied markets like the Atlantic Seaboard also continue offering opportunities.

Mixed-use developments now command an 18% yield premium over single-use properties, reflecting changing urban preferences.