Brandon Donnelly
THE DAILY INFILL is a blog for city builders written by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
THE DAILY INFILL is a blog for city builders written by Toronto-based real estate developer Brandon Donnelly.
According to the Financial Times, Cape Town's population (metropolitan area) grew by 27.6% from 2011 to 2022, landing at approximately 4.77 million. Last year it was estimated at 4.97 million. At the same time, residential property prices increased by about 160% during the period from 2010 to 2024, outpacing all other cities in South Africa. Last year the average price of a home increased by 8.5% in Cape Town versus the national average of 4.5%. And as is the case in most desirable cities around the world, this has some people worried.
But who and what is to blame?
Is it because of tourism? It is estimated that there are some 25,800 active short-term rental listings in the city. Is it digital nomads? South Africa recently launched a Digital Nomad Visa program allowing foreign nationals to live and work in the country provided they can demonstrate an annual income of at least 650,976 ZAR (US$37,500). However, this is a recent thing. Is it foreigners coming with US dollars, euros, and/or pounds? Or is it because of internal migration, which South Africans refer to as "semigration?"
As always, it's a debate. But I think the outcome we are seeing makes intuitive sense for at least three reasons. One, Cape Town is an objectively beautiful and amenity-rich city sandwiched between mountains and the ocean. See above cover photo. It also has a warm and temperate climate. The average high in January (their summer) is 29 degrees and the average high in July (their winter) is 19 degrees. This is a huge competitive advantage — albeit a natural one.
Two, it's a relatively safe place. The above FT article quotes a transplant from Johannesburg saying, "You can't ride your bike in Joburg unless you are in a walled-off estate." If you have the means, that's a strong motivator to move somewhere else. And it's understandably easy to assign a lot of value to safety and security. "Sure, this home may be more expensive, but I can walk to places and ride my bike without fear." That's something worth spending money on.
Lastly, we are all becoming less tethered to specific locations. Digital nomadism and remote work are here to stay. But I don't think this means that people are going to just decentralize and move to the middle of nowhere. I think it means that people are going to increasingly vote with their feet and choose exactly where they want to live their life. What this means is that the need to create better places is only going to become more important. Because more than ever, every place is now in a global competition for talent and investment dollars.
Cover photo by Tobias Reich on Unsplash
By some measures, housing affordability is, in aggregate, the worst it has been in Canada going back to the 1980s. Below is a chart from RBC showing homeownership costs as a percentage of median household income.
The previous spike came around the early 90s, but following that, we saw 3 decades of relative affordability. In fact, for a large portion of this timeline, condo apartments look to be hovering around 1/3 of median household income. This is a common rule of thumb for measuring affordability.
Now obviously things changed pretty dramatically during the pandemic. But that time has ended and a reset is underway. New housing supply has
Yesterday, I asked this on Twitter:
https://twitter.com/donnelly_b/status/1670963859375509505?s=20
And then I learned that Victoria-based Aryze is already doing it:
https://twitter.com/TalktoARYZE/status/1671148930187534342?s=20
I was a little surprised by some of the numbers here, namely municipal fees. But that is not the point here. The point is that this is a great idea and that, judging from the comments on Twitter, many people seem to want this.
The obvious benefit is that it allows consumers to better understand where their money is going. But I also think that by showing people all of the costs that get levied on new housing, it could benefit the overall development industry.
What do you think? Should developers in Toronto adopt a similar approach? Let me know in the comments below.
According to the Financial Times, Cape Town's population (metropolitan area) grew by 27.6% from 2011 to 2022, landing at approximately 4.77 million. Last year it was estimated at 4.97 million. At the same time, residential property prices increased by about 160% during the period from 2010 to 2024, outpacing all other cities in South Africa. Last year the average price of a home increased by 8.5% in Cape Town versus the national average of 4.5%. And as is the case in most desirable cities around the world, this has some people worried.
But who and what is to blame?
Is it because of tourism? It is estimated that there are some 25,800 active short-term rental listings in the city. Is it digital nomads? South Africa recently launched a Digital Nomad Visa program allowing foreign nationals to live and work in the country provided they can demonstrate an annual income of at least 650,976 ZAR (US$37,500). However, this is a recent thing. Is it foreigners coming with US dollars, euros, and/or pounds? Or is it because of internal migration, which South Africans refer to as "semigration?"
As always, it's a debate. But I think the outcome we are seeing makes intuitive sense for at least three reasons. One, Cape Town is an objectively beautiful and amenity-rich city sandwiched between mountains and the ocean. See above cover photo. It also has a warm and temperate climate. The average high in January (their summer) is 29 degrees and the average high in July (their winter) is 19 degrees. This is a huge competitive advantage — albeit a natural one.
Two, it's a relatively safe place. The above FT article quotes a transplant from Johannesburg saying, "You can't ride your bike in Joburg unless you are in a walled-off estate." If you have the means, that's a strong motivator to move somewhere else. And it's understandably easy to assign a lot of value to safety and security. "Sure, this home may be more expensive, but I can walk to places and ride my bike without fear." That's something worth spending money on.
Lastly, we are all becoming less tethered to specific locations. Digital nomadism and remote work are here to stay. But I don't think this means that people are going to just decentralize and move to the middle of nowhere. I think it means that people are going to increasingly vote with their feet and choose exactly where they want to live their life. What this means is that the need to create better places is only going to become more important. Because more than ever, every place is now in a global competition for talent and investment dollars.
Cover photo by Tobias Reich on Unsplash
By some measures, housing affordability is, in aggregate, the worst it has been in Canada going back to the 1980s. Below is a chart from RBC showing homeownership costs as a percentage of median household income.
The previous spike came around the early 90s, but following that, we saw 3 decades of relative affordability. In fact, for a large portion of this timeline, condo apartments look to be hovering around 1/3 of median household income. This is a common rule of thumb for measuring affordability.
Now obviously things changed pretty dramatically during the pandemic. But that time has ended and a reset is underway. New housing supply has
Yesterday, I asked this on Twitter:
https://twitter.com/donnelly_b/status/1670963859375509505?s=20
And then I learned that Victoria-based Aryze is already doing it:
https://twitter.com/TalktoARYZE/status/1671148930187534342?s=20
I was a little surprised by some of the numbers here, namely municipal fees. But that is not the point here. The point is that this is a great idea and that, judging from the comments on Twitter, many people seem to want this.
The obvious benefit is that it allows consumers to better understand where their money is going. But I also think that by showing people all of the costs that get levied on new housing, it could benefit the overall development industry.
What do you think? Should developers in Toronto adopt a similar approach? Let me know in the comments below.
With so much uncertainty, it's challenging, if not impossible, to know exactly how all of this will play out in the coming years. But I suspect that, as time goes on, the above chart is going to start to mirror what we saw in the early and mid-90's. In other words, affordability is going to improve.
With so much uncertainty, it's challenging, if not impossible, to know exactly how all of this will play out in the coming years. But I suspect that, as time goes on, the above chart is going to start to mirror what we saw in the early and mid-90's. In other words, affordability is going to improve.
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