SET against the backdrop of the summit of Table Mountain, Cape Town is an iconic city. Below its 3,562ft pinnacle, the vibrant central district, busy bay and V&A waterfront are testimony to a city that has been rejuvenated since the turn of the millennium.

“More than R15billion (£1.07 billion) has been invested in Cape Town since 2000,” says Andrew Boraine, chief executive of the Cape Town Partnership, an organisation that is charged with leading the process of urban regeneration in the city. “The city introduced a ‘clean and safe’ model that has helped to reduce crime in the Central Business District (CBD) by 90 per cent in the past seven years.”

The result of the initiative is a central district in which 11 hotels have opened in the past five years, office vacancy is down to 4 per cent (10 per cent is the average for international cities) and property prices have doubled in three years.

“Cape Town is in its infancy,” says Frank Gormley, the chairman of Eurocape, a developer in the CBD. “I said three years ago that the city’s property market hadn’t begun – it has now. Capital growth has been 35 per cent per annum for the past three years in Cape Town. Over the next five years, I predict prices will rise by around 20 per cent a year.”

Gormley’s confidence is based on factors that include an hotel room occupancy rate of 90 per cent, the conference centre being booked for the next five years, the emergence of the country’s black middle class and property prices still being very reasonable – around £1,000 per sq m in the CBD. The biggest boost for Cape Town and the country as a whole, however, is the hosting of the 2010 Fifa World Cup.

“The opportunity is huge,” Gormley says. “The World Cup will put the place on a world stage – but there remains much to do, too. The infrastructure is poor and there’s a lack of work skills among the black population. Importantly, there’s a tremendous desire to learn, and increasingly an educated and growing black middle class.”

Anecdotally (no records are kept), approximately 25 per cent of the black population own their own property. Ronald Enik, chief operating officer of the Pam Golding Property Group, a firm of estate agents, says: “Ownership of homes by black people in Johannesburg’s affluent northern suburbs has increased by 700 per cent in the past five years. The black middle class now accounts for more than 20 per cent of Pam Golding Properties’ business – up from 7 per cent in 1998.”

The impact is that house prices are growing quickest at the lower end of the market. Prices of “affordable” houses grew 21 per cent in 2005 and 10 per cent in 2006. “Mid-sector” house prices increased by 18.7 per cent in 2005 and by 10 per cent last year. In the luxury sector, prices grew by 4.6 per cent in 2005 and 5.9 per cent in 2006.

A stable economy, too, is assisting home ownership growth. Earlier this year inflation slowed to a seven-month low of 4.9 per cent year-on-year, GDP growth has averaged 4.1 per cent a year since 2000 (5 per cent in 2006), and variable interest rates are at their lowest since the 1980s, currently 12.5 per cent.

The average price of a medium-sized 141-220 sq m “middle segment” house nationally is approximately R825,000. With the average UK property costing £192,223, according to Halifax, and sterling strong against the rand (£1=R14), British buyers will find their pound goes far in Cape Town.

Eleven apartments of 180 built remain for sale at the stylish Mandela Rhodes Place, a courtyard atrium with restaurants, winery and boutiques. Prices start at R1.8 million, an increase of £40,000 since the off-plan price of late 2005. A rental pool is in operation, offering a two-year guaranteed rental income of 8 per cent gross.

But Cape Town is not all about new buildings. Heading towards Table Mountain, away from the CBD, a mix of Dutch gabled and Belle Epoque buildings with verandas mingle to create a bohemian feel. Property for sale includes a renovated semidetached, three-bedroom house on a cobbled street in historic Bo Kaap. The price is R1.48 million through the agents Seeff.

If the idea of owning a freehold fraction of an apartment in Cape Town appeal, StoneBridge’s Cape Royale venture could be worth exploring. It is set on the V&A Waterfront and prices start at R456,000; owners buy a thirteenth fractional share of an apartment with 28 days of use each year.

Mandela Rhodes Place, Eurocape 00 27 21 426 4759 www.eurocape.co.za Seeff 00 27 21 423 9146 www.seeff.com StoneBridge 00 27 21 913 8393 www.stonebridgelg.com

FACTFILE

Only one per cent of property in South Africa is owned by foreigners.

Foreign buyers may obtain a mortgage for a maximum of 50 per cent of a property’s purchase price. The 50 per cent deposit must be funded personally.

Almost all freestanding houses are owned freehold.

Buying off-plan direct from the developers means no transfer duty is applicable; otherwise the levy is 5-8 per cent of the property purchase price.

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