Prime residential prices in Cape Town skyrocketed in 2022, according to The 2023 Wealth Report by Knight Frank.

According to the global real estate specialist’s annual report, Cape Town shot up the Prime International Residential Index (PIRI) – climbing to 31st from 94th the year prior.

The PIRI tracks movements in luxury prices across the globe’s top residential markets.

The report said that Cape Town’s prime residential prices increased by 7.3%.

“Having slipped due to feeling the effects of the pandemic on a third-world country, (Cape Town) has again proved incredibly resilient and is once again attracting both South Africans from other territories as well as foreign buyers looking for second homes and to enjoy the beauty, lifestyle and value that the city has to offer,” said Nick Gaertner, Director and COO of Knight Frank South Africa.

“While the broader South Africa continues to struggle with poor governance, strong leadership in the City of Cape Town has managed to steadily separate it from other regions within the country and develop itself into a growlingly desirable destination globally,” Gaertner added.

Dubai, in the United Arab Emirates saw the largest prime residential increase in 2022, with a 44.2% jump. Knight Frank said that Dubai had cemented its status as a global hub for extreme-high-net-worth individuals, which was assisted by several visa incentives.

Aspen, USA (27.6%), Riyadh, Saudi Arabia (25.0%), Tokyo, Japan (22.8%) and Miami, USA (21.6%) completed the top five.

Monaco was the most expensive residential market in the world.

Not only has Cape Town’s prime real estate become more valuable, it also provides one of the most affordable luxury property markets in the world, tracking behind only Sao Paulo, in Brazil.

Using the “PIRI pagoda”, Knight Frank calculated how far $1 million would go when it comes to prime residential property.

In Monaco, $1 million will only get a buyer 17 square metres. By comparison, Cape Town offered excellent value as $1 million would get a buyer 218 square metres of prime property.

South Africa, on the whole, has the most international prime residential marketplace in Africa, the group said.

This has made it a popular destination for foreign buyers. The main international buyers  of prime property in South Africa were from the UK, Germany, Austria, France, the USA, Belgium and Canada.

Overall property market 

According to Knight Frank, 2021 was widely referred to as “an anomaly” – a year characterised by stellar price growth as markets reopened post-Covid-19, and “revenge spending” took hold.

“Off the back of such a boom, you might be forgiven for thinking 2022 would see a return to business as usual,” it said. However, this was not the case. In fact, it was far from it, the group said.

“Omit 2021, and 2022 posted the highest level of prime price growth on an annual basis (5.2%) since the global financial crisis.”

 Although wealth preservation, safe-have capital flight and supply contracts all influenced house price growth, it was the post-pandemic surge that continued to push prices higher.

However, despite the post-Covid boom, luxury markets are not immune from major increases in interest rates, the group warned.

“Price growth will slow in 2023, but markets will deflate rather than collapse – this isn’t 2008,” it said.

A transition from a sellers’ to a buyer’s market is underway, but limited prime stock in several major cities worsened by the pandemic is putting a floor under luxury prices.

As many countries, including South Africa, potentially pass their inflation peak – ending their monetary tightening phase – more attention will be paid to the resilience of the labour market, as forced sellers have been notable by their absence, the group said.

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