Prices of Cape Town homes booming as foreign buyers jump in, pricing out locals

Key topics:Cape Town property prices surged 160% since 2010, outpacing all SA metrosBorn Frees face barriers to homeownership, worsened by lack of generational wealthCity efforts aim to boost affordable housing but demand still outstrips supply.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.The auditorium doors will open for BNIC#2 on 10 September 2025 in Hermanus. For more information and tickets, click here..By Katlego Mtshali and Loni Prinsloo.South Africa’s first generation of citizens born after the end of apartheid are able to buy property that was once off limits to their parents. But there's another obstacle to homeownership: price.Nowhere is this more evident than in Cape Town, home to Africa’s most expensive real estate. The city has seen an influx of newcomers: South Africans are escaping government dysfunction and infrastructure decay elsewhere and are attracted by good jobs; foreigners are lured by the area’s beauty and still-cheap home values relative to other developed regions. Property prices in the picturesque Atlantic Ocean city have climbed 160% since 2010, outpacing growth in the country’s other metropolitan areas, according to Statistics South Africa. Values in Johannesburg — Africa’s richest city — have risen by less than half of that over the same period. The Western Cape province — where Cape Town is situated — is the preferred destination for foreign buyers, accounting for about 40% of all purchases in transactions exceeding 10 million rand ($552,000) last year and about 15% of those between 3 million rand and 5 million rand, a proportion that keeps growing, data from property company Lightstone Group show. .For young people born around 1994 — known as Born Frees — this makes the dream of owning a home close to places of work in a key employment hubs such as Cape Town all the more distant. Born Frees of all races “are finding it harder to buy property because the closer you get to economic activity, the more expensive it is — even studio apartments are going for 1 million rand and more in Cape Town,” said Mfundo Mabaso, the head of home and structured lending at FirstRand Ltd.’s First National Bank unit. .Read more:.FT: How the world sees SA: Are too many people moving to Cape Town?.The problem is exacerbated for Born Frees who are not White. Many have overcome challenges faced by their parents by obtaining degrees in fields such as science, finance and technology and are making their mark in the professional world. But they generally don’t have the intergenerational wealth to help them onto the property ladder that some White South Africans enjoy. Instead, many have the opposite experience of having to send money home to support their extended families.Curtley Serfontein, born two years before the first democratic elections in 1994, has had to move about 35 kilometres (22 miles) outside of central Cape Town to find an affordable place to rent..The data analyst is Colored — a term coined by the apartheid government to refer to those of mixed race or people descended from the indigenous Khoisan nation — and his father was a cabinet maker with limited training opportunities and constraints on where he could purchase property during White-minority rule.Despite the odds, Serfontein’s father was able to buy a house in Fairbridge Heights, a traditionally White area of Kariega in the Eastern Cape province in 1995, a year after apartheid ended.Now, Curtley Serfontein’s dream is to also own a property, preferably in Cape Town, where he is building his career. He explored applying for First Home Finance, a Department of Human Settlements initiative that enables first-time homeownership for citizens whose household income doesn’t exceed 22,000 rand monthly, but didn’t qualify because he isn’t married, cohabiting, or a single person with a dependent — conditions for the subsidy.“I am fully aware that if I wanted to move closer to work it would come at a hefty price,” Serfontein said.Banks are finding ways to fill the gap for first-time buyers, offering them 100% home loans as well as allowing purchasers to borrow the upfront costs. First National Bank is allowing people to buy in groups, enabling as many as 12 people to be signatories on a mortgage, according to Mabaso. While these initiatives are helpful, they don’t go far for people looking to buy in Cape Town’s central business district and areas around it. The average loan-approval amount for purchasers under 35 is 1.2 million rand, Standard Bank Group Ltd. said in its inaugural Youth Barometer report released June 13. In Cape Town’s City Bowl, that would only just cover a 26 square-meter (280 square-foot) studio. The metropolitan area’s breathtaking landscape is part of its limits — its sought-after City Bowl and adjacent residential areas are housed in a natural amphitheater surrounded by the iconic Table Mountain and the Atlantic Ocean, leaving little room for expansion..The city’s administration — which is run by the Democratic Alliance and is the only one of South Africa’s nine metropolitan municipalities to get a clean audit in the most recent round of checks — has released several inner-city land parcels for affordable housing, including Salt River Market, Pine Road, Dillon Lane, Pickwick Street and New Market Street in the Woodstock and Salt River areas, according to Carl Pophaim, the mayoral committee member for human settlements. .Read more:.FT: Cape Town’s unis, infrastructure, lifestyle making it a global magnet for start-ups.It has also created a so-called Development Charges Fund to cover up to 90% of the costs of bulk services such as roads, sewage and waste removal for micro-developers building affordable housing in 194 lower-income communities.“This model has big potential to help solve Cape Town’s housing shortage,” said Eddie Andrews, who runs spatial planning and environment affairs in the mayor’s office. With many entrepreneurs undertaking small housing investments, it “adds up to massive change across Cape Town,” he said. In addition, the city is developing off-the-shelf building plans for quicker approvals, promoting alternative building materials and exploring additional financing mechanisms and support, said Andrews.Ultimately, “the fundamental reason why well-located housing is unaffordable to so many people is because there is not enough housing supply on the market,” he said..That’s something that Serfontein discussed over a meal with his friends Sonke Ludwele, 25, and Sakhe Humphery, 26, who — like him — hail from the Eastern Cape, the country’s poorest province.Ludwele is from Butterworth and works as a quantitative analyst, with hopes of becoming an investment banker. Humphery, now a credit analyst, is from East London in the Buffalo City municipality, where he often sends money home.Serfontein shares that he is saving toward giving homeownership another chance.“I didn’t realise it would be this tough, and it’s the toughest in Cape Town, I think.”.© 2025 Bloomberg L.P.

Prices of Cape Town homes booming as foreign buyers jump in, pricing out locals

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