Locals out-priced in Cape’s hotspot property market

Published Feb 26, 2024


Jostling for a piece of the real estate pie with flush returning-home South Africans, plus foreign digital nomads and investors whose currencies go further than the ailing Rand, local first-time home buyers and your every-day renters in Cape Town are having a tough start to 2024.

Could this be the beginning of a new type of housing crisis on our shores?

Not only are some areas such as the Atlantic Seaboard and areas in the City Bowl becoming highly unaffordable for locals to buy into, rentals themselves are on the rise.

On social media, South Africans took to TikTok to complain about how the Cape Town property market has become unaffordable for them, and some are pointing a direct finger at digital nomads.

One TikToker - @NomadicKingdom – claims the cost of living in Cape Town is 76% lower than in the US and rent 71% lower. Obviously this makes it a perfect spot for foreigners with cash, not so much locals who are trying to compete for property and rentals with their often stagnant salaries.

Another - @marcelineshideout - says “finding an apartment to rent in Cape Town is like finding a needle in a haystack”. And estate agents say some homes are being rented site unseen, with landlords wanting two months deposit upfront.

One TikToker added that while rent is cheap if you have foreign currency, “for us born here and who live here, in SA, in general we can’t even afford to breathe”, adding that Capetonians are being pushed out of Cape Town.

Added to that a proposed SA Digital Nomad Visa – which countries such as Portugal, Estonia, and Mexico already have – would attract even more digital nomads to the shore.

While this is a double edged sword for those who don’t want to choose between paying rent and putting food on the table, with their stronger international currencies, digital nomads do spend significant amounts in the countries they find themselves in, helping to grow the economy and create more jobs in the tourism and hospitality industries.

However, warns Grant Smee, managing director of Only Realty Property Group, “landlords must think about the bigger picture, and the possibility of contributing to a housing market that primarily caters to international earners who can outprice locals, which could cause a housing crisis as seen in many major cities.”

He says this proposed new visa is still in the draft stages and would, if passed, allow remote workers to live and work in South Africa for a maximum period of three years while being employed by an overseas company.

“However, anecdotal evidence suggests that there are already thousands of digital nomads in the country, working remotely while on a tourist visa. While not strictly legal, it is difficult for the government to regulate this kind of activity - allowing many to slip under the radar.”

If the proposed Digital Nomad Visa is passed, a higher percentage of international remote workers will seek out traditional long-term lease agreements. While an influx of renters with extremely deep pockets is an attractive prospect to landlords, Smee cautions that these high-income tenants are not without their drawbacks.

Meanwhile would-be homeowners and homeowners hoping for some relief from Finance Minister Enoch Godongwana's 2024 budget speech this week, found little in the mixed bag.

In fact, Lew Geffen Sotheby’s International Realty CEO Yael Geffen felt the Budget “does nothing to change the reality for our millions of citizens drowning in debt and staggering from pay cheque to pay cheque.

“It also puts the dream of owning a home even further out of reach for many South Africans, which doesn’t bode well for property market recovery this year either.”

While the general fuel levy remains unchanged, the introduction of the carbon fuel levy for petrol and diesel, coupled with the lack of adjustments to tax tables for inflation, raises concerns.

Bradd Bendall, Interim CEO of BetterBond, noted the absence of relief for taxpayers in a high inflationary environment. Bendall warns of potential bracket creep, impacting on monthly budgets. He emphasizes the importance of locals to have prudent financial planning.

Dr Andrew Golding, CEO of the Pam Golding Property Group, expressed regret over the budget's failure to extend the solar rooftop tax incentive for residential properties.

Given that South Africans experienced the worst year of load shedding last year, an extension of the incentive, which ends at the end of this month, would have been a welcomed hand-up.

Seeff Property Group chairman, Samuel Seeff, acknowledged the unchanged property taxes but expressed disappointment at the lack of economic growth and higher inflation. Seeff was also critical of the missed opportunity to increase the transfer duty exemption threshold and extend solar installation tax breaks.

Herschel Jawitz, CEO of Jawitz Properties, expressed dismay at the budget, criticising the lack of adjustments to tax tables and the absence of relief for the residential market. Jawitz believes the budget offers little to instil confidence in the economic outlook.