One of the three capital cities of South Africa, and one of the country's cities most visited by tourists since post-apartheid 1990s, Cape Town is notable for its incredibly unique location and dynamic mix of cultures. Sitting between the imposing Table Mountain and scenic Table Bay, Cape Town is considered by locals and many tourists to be one of the world's most beautiful cities.

Natural splendour is not the only quality of Cape Town. Despite being one of three important capital cities, Cape Town is unique in that it houses the seat of the Parliament of South Africa. It is also a city intimately connected with Nelson Mandela, with Cape Town's Harbour housing the boats which would have taken him to the Robben Island prison.

In the present day, Cape Town is the economic hub of the Western Cape, home to financial services firms and manufacturing facilities. Since South Africa's hosting of the 2010 FIFA World Cup, Cape Town experienced a steep uptick in tourism, Foreign Direct Investment (FDI) and government spending. However, very high crime rates and HIV/AIDs continue to impact the area.

  • Cape Town is one of three capital cities of South Africa and houses the seat of the national Parliament.
  • Situated at the foot of Table Mountain, Cape Town is considered one of the most naturally beautiful cities in the world.
  • Crime rates in the capital have been very high for numerous years and health epidemics continue to impact the city.

Housing Market

For property investors looking to explore opportunities in Cape Town, Returns on Investment (ROI) may not match up to the gains to be made in Johannesburg. Gross rental yields range, on average, from 5% to approximately 8.3%. Historically, Johannesburg has consistently outperformed Cape Town in relation to yields.

Across all locations, Cape Town can offer property investors, speculating on the buy-to-let market, average gross rental yields of around 6.45%. However, Cape Town has a wealth of different districts for property investors to choose from, when deciding where to invest. The amount of yield generated for landlords – as well as capital appreciation on the asset itself – depends on location.

In the Atlantic Seaboard area, three-bedroom apartments cost on average $470,857, while studio apartments can cost $135,266 on average. Monthly rents can cost tenants $2,223 per calendar month for a three-bedroom apartment and $556 pcm at the lower end for a studio apartment. In the Southern Suburbs, rental yields average over 8% for a three-bedroom apartment.

City Bowl is another well-developed residential suburb. Due to its central location and dynamic setting – with plenty to see and do – City Bowl is one of the most stable residential markets in Cape Town. However, gross rental yields can vary, reaching 6.40%, 5.84%, 5.32% and 2.56% for studio, one-bedroom, two-bedroom and three-bedroom apartments respectively.

Conclusion

Despite some setbacks, property investors should consider Cape Town to be a unique investment with attractive gross rental yields in the buy-to-let market. Architectural structures vary widely and Cape Town is home to well-preserved and restored Edwardian and Victorian buildings, as well as contemporary high-rise tower blocks, which have shaped the city's skyline.

As with other South African cities, Roundtrip transaction costs are high and can cost investors as much as 29%. Furthermore, Cape Town has suffered in recent years from globally-recognised crime rates, far above average levels for an international city. However, properties in City Bowl and Atlantic Seaboard offer solid ROI opportunities for property speculators willing to forgo such risks.