Cape Town’s housing boom is becoming an affordability crisis
Cape Town’s property boom is pricing out buyers. UCT economist Dr Allan Davids warns why housing affordability could become South Africa’s next economic crisis.
- Cape Town’s rising property prices are outpacing incomes, with mortgage affordability becoming a growing challenge for middle-income households.
- UCT economist Dr Allan Davids warns that housing costs are approaching 50% of income for a representative Cape Town buyer.
- Higher-density development, increased housing supply and better public transport are essential to protecting affordability and future economic growth.
Cape Town: A victim of its own success?
Cape Town has become one of South Africa’s most desirable property markets, attracting homeowners, investors, professionals and businesses seeking better lifestyles, economic opportunities and reliable municipal services.
But the city’s success is creating an increasingly serious problem: property prices are rising beyond the reach of many South Africans.
Speaking at the 2026 LexisNexis Future of Conveyancing Conference in Century City, University of Cape Town economist Dr Allan Davids warned that housing affordability could become one of the defining economic and political challenges of the next decade.
The issue is no longer simply whether Cape Town can continue attracting buyers and investment. It is whether the city can deliver enough homes for the people who need to live and work there.
Why Cape Town is becoming a ’superstar city’
Cape Town’s property market has benefited from semigration, lifestyle appeal, economic activity and comparatively strong municipal performance.
According to Davids, declining service delivery elsewhere has accelerated demand for homes in the Western Cape. “Failing municipalities and poor service delivery across the country has led to a surge in the demand to want to live in Cape Town,” he said.
The result is a widening gap between Cape Town and other South African metropolitan property markets.
While property values in several major cities have stagnated or declined in real terms over the past decade, Cape Town has continued to attract buyers and record stronger price growth. Davids describes Cape Town as an emerging superstar city, a highly desirable urban centre where demand grows faster than housing supply.
Similar pressures are evident internationally in cities such as New York and Paris, where affordability has become a major political and economic concern.
“What makes this wave of rising house prices different is that we’re seeing housing affordability worsen as well,” Davids explained.
The challenge is that a successful property market does not necessarily translate into an affordable housing market.
The 50% warning: Homeownership is slipping out of reach
One of Davids’ most concerning observations relates to the growing proportion of household income required to purchase a home.
“If you look at Cape Town towards the middle of the distribution there, that number is tending towards 50%,” he said. This refers to an affordability measure comparing mortgage repayments on a median-priced home with income around the middle of the distribution.
For illustration, a household earning R40,000 monthly would face a R20,000 bond repayment if housing finance consumed half its income, before rates, insurance, maintenance and other expenses.
The consequences are becoming increasingly visible:
- First-time buyers: Higher property prices and deposits delay entry into homeownership.
- Young professionals: More households are renting longer or purchasing smaller homes.
- Middle-income families: Housing expenses absorb a growing share of disposable income.
- Existing homeowners: Rising values create wealth, but make upgrading or relocating more expensive.
- Property investors: Strong demand may support rentals, but tenant affordability limits sustainable rental growth.
“We’re seeing individuals enter into home ownership much later than they did historically,” Davids said.
Housing is becoming an economic and political issue
Davids believes housing affordability is no longer just a property sector concern. “Housing is no longer a sectoral issue. It is likely to be the number one political issue in our economy,” he warned.
Housing has a unique economic role because it is simultaneously a place to live, an investment asset and a debt-financed purchase. As prices increase, the benefits and costs are distributed unevenly.
Davids referred to the international housing theory of everything, which explores how housing shortages affect wider economic and social outcomes. The implications include:
- Economic productivity: Employees struggle to live near major employment centres.
- Labour mobility: Expensive housing makes it harder for businesses to attract skilled workers.
- Family formation: Younger households may delay marriage, children and homeownership.
- Inequality: Existing owners accumulate property wealth while prospective buyers fall further behind.
- Business investment: Rising housing and transport costs can weaken a city’s competitiveness.
The warning is particularly relevant to Cape Town, where continued economic growth depends on attracting and retaining workers across different income groups.
Urban sprawl: The hidden cost of cheaper housing
As centrally located properties become less affordable, households increasingly look towards the urban fringe. Although these areas may offer lower purchase prices, residents often face longer commutes and higher transport expenses.
Davids warned that poorly planned expansion could reinforce South Africa’s historical spatial inequalities. “If we’re not really careful to pair this urban sprawl with fast, low-cost and reliable public transport, we’re essentially just going to entrench and recreate apartheid-style spatial planning dynamics in our cities,” he said.
For developers and investors, this reinforces an important principle: housing affordability must include the total cost of living, not simply the property’s purchase price.
Transport access, employment proximity, infrastructure and essential amenities are increasingly important indicators of sustainable housing demand.
The solution: Build more homes, and build smarter
While public debate often focuses on rent controls, foreign ownership restrictions and short-term letting regulations, Davids believes the most sustainable response is increasing housing supply.
“We need to build more housing, and we need to build more housing everywhere,” he said. That includes accepting higher-density development in established residential neighbourhoods.
“We’re going to have to be fine with the fact that our suburban suburbs are now going to have high-rise buildings,” he added. Four priorities emerge from his argument:
- Accelerate housing delivery
Reduce obstacles preventing approved residential developments from reaching completion. - Encourage higher-density housing
Support appropriately located apartments, infill developments and mixed-use projects. - Invest in infrastructure
Align housing growth with water, electricity, sanitation and reliable public transport. - Improve development viability
Create conditions that allow private capital to deliver more homes across different affordability levels.
Increasing supply will require coordination between municipalities, developers, financiers and infrastructure providers.
What does this mean for property investors?
Cape Town’s affordability challenge presents opportunities, but investors must look beyond rising property prices. Five investment considerations stand out:
- Rental demand: Delayed homeownership could support demand for well-located rental properties.
- Affordable housing: Smaller, efficiently designed homes may appeal to a growing segment of the market.
- Densification: Suitable redevelopment and sectional-title opportunities could benefit from changing housing requirements.
- Location: Properties near transport routes and employment centres may offer more sustainable tenant demand.
- Investment returns: Strong capital appreciation does not automatically produce attractive rental yields or positive cash flow.
For developers, the opportunity is to deliver housing that matches actual household purchasing power. For investors, the priority remains buying at the right price, understanding tenant affordability and calculating realistic net returns.
A national warning for South Africa
Although Cape Town provides a compelling example, the challenges highlighted by Davids have implications for other South African cities. Municipal performance, infrastructure investment, housing delivery and migration patterns increasingly influence property demand and long-term economic growth.
Leigh-Anne Webster, Head of Product for Workflow Solutions at LexisNexis South Africa, believes the lessons extend well beyond the Western Cape. “While Cape Town offers a compelling case study of the pressures facing growing urban centres, the lessons extend across South Africa. Addressing access to property will require coordinated planning, investment and innovation to ensure our cities remain places where people can live, work and build their futures,” she said.
LexisNexis, part of global information and analytics group RELX, hosted the Future of Conveyancing Conference to explore developments affecting the property and conveyancing sectors.
The way forward: Can Cape Town remain affordable?
Cape Town’s property success has attracted investment, supported capital appreciation and strengthened its appeal as a place to live and work. But continued price growth without sufficient housing delivery risks excluding the very households and workers needed to sustain that success.
The next chapter of the city’s property market must focus on balancing investment demand with housing affordability.
For policymakers, that means enabling faster development and investing in infrastructure. For developers, it means delivering financially viable homes across income segments. And for investors, it means identifying opportunities supported by genuine, sustainable housing demand.
Cape Town’s greatest property challenge may no longer be attracting buyers. It may be ensuring that enough people can afford to live in the city they want to call home.
Source: Dr Allan Davids, University of Cape Town, speaking at the 2026 LexisNexis Future of Conveyancing Conference, Century City, Cape Town. Additional commentary from Leigh-Anne Webster, LexisNexis South Africa.
