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Standard Bank building loan data reveals rising trend in Cape Town property market

Staff Writer
Estimated reading time: 3 minutes

Data from Standard Bank shows that one in eight mortgage applications nationally over the past year were for buy-to-let properties, highlighting the growing interest in property investment across South Africa.

The Western Cape stands out as a key hotspot, with 31% of new home loan applications in the province linked to buy-to-let ventures—more than double the national average of 12%.

“Over the past decade, the Western Cape has consistently positioned itself as an investment destination. Areas like Cape Town have benefitted from steady demand driven by tourism and a growing expat community,” said Chiko Manokore, head of Personal and Private Banking at Standard Bank.

The surge in interest in bed and breakfasts (B&Bs) and stand-alone homes within estates has been particularly notable over the last five years. The Western Cape also ranks second—after Gauteng—in terms of building loans issued by Standard Bank, with a significant portion of these loans taken up by buy-to-let investors.

“You are seeing more uptake for large estates, lots of bed and breakfasts, and interestingly, a growing number of people building multiple properties on a single stand,” added Manokore.

In Gauteng, South Africa’s economic hub, buy-to-let activity is nearly double the national average, with Tshwane leading in property investment. The province’s rental market is largely driven by investors seeking additional income streams.

“In Johannesburg, property investment tends to focus more on rental income, unlike the Western Cape, where short-term rentals are particularly popular,” said Manokore.

The Eastern Cape is also gaining traction in the buy-to-let market, with property investment exceeding the national average. In contrast, KwaZulu-Natal (KZN) has seen a dip in buy-to-let activity, with only 6% of home loan applications in the province linked to property investment.

“KwaZulu-Natal unfortunately has lost some speed, especially in the last few years, due to challenges like environmental setbacks, floods, and the 2021 riots, which have impacted investor confidence,” the property lead said.

Despite economic challenges and high inflation, South Africa’s rental market showed remarkable resilience throughout 2024.

Some analysts are speculating that recent interest rate cuts could prompt more tenants to transition into homeownership.

Grant Smee, CEO of Only Realty Property Group, noted that rental growth outpaced inflation for the first time in nearly five years, rising by 5.2% year-on-year in June 2024.

The Western Cape, South Africa’s most expensive province, led the charge with a rental growth rate of 9.7%, narrowly edged out by the North West province.

Gauteng and KwaZulu-Natal, however, experienced some of the lowest growth rates.

According to StatsSA’s Household Survey, the percentage of households opting to rent increased from 17.7% in 2020 to 23.9% in 2022. This shift was further reinforced by a slowdown in rental escalations to 4.29% in Q2 2024, as reported by TPN.

Smee attributes this trend to the flexibility and affordability rental properties offer, especially in areas like gated estates, where purchase costs can be prohibitive.

While interest rate cuts could make homeownership more accessible, Smee pointed out that high living costs and reduced savings may still deter potential buyers.

He also notes that financial stability and savings are critical for securing home loans, with many lenders requiring a deposit.

However, Smee does see a positive impact for buy-to-let investors, particularly in the Western Cape, where demand remains high.

Lower interest rates may encourage investors to secure properties that offer rental income and help cover expenses.

He also acknowledged the potential drawbacks for tenants, as they may not see immediate benefits from rate cuts, unlike property owners.

Nonetheless, he believes the interest rate adjustments will have more positive than negative effects overall, even if some areas, like Gauteng, experience higher vacancy rates.

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