Profile: South Africa One to three-bedroom apartments costing from €125,000 in Cape Town's city centre currently offer good value to investors. Bill Corcoran reports from a city where many Irish people have bought properties in recent years.

The fact that around 2,000 home-based Irish investors have bought second properties in South Africa's mother city, Cape Town, in the last few years speaks volumes about the climate and location of the Western Cape's capital.

With the visually stunning Table Mountain as its backdrop, and pristine white sandy beaches situated a half hour's drive from the city in all directions, it's not hard to understand the attraction.

The only real worry potential investors had in the past was whether the nation could stabilise during the post-apartheid era so that investments could actually be realised.

However, the apocalyptic scenarios envisaged by those who supported the old white regime have yet to materialise, and the foreign investors who took a chance and poured their money into Cape Town property have made huge financial gains to date.

An increase in cheap direct flights from Ireland to Cape Town has contributed to the growing number of Irish people investing in South African property and, according to the Irish Embassy in Pretoria, there are around 40,000 Irish passport holders here at present.

Last year alone the Pam Golding Property Group, the country's biggest property agents, handled about €125 million worth of foreign investment, of which a sizeable portion, the group says, could be attributed to Irish investors.

The company's Western Cape managing director, Mick Joyce, says that over the last couple of years people who have invested in Cape Town's mid-range properties - which currently cost in the region of €200,000 and €300,000 - have experienced annual value increases of around 30 per cent.

"These value increases are due in part to the strengthening of South Africa's currency, the Rand. Investors bought when it was weak and now are doing well because of its relative strength compared to foreign currencies.

"Property was also under-valued in the past which contributed to the current investment gains, but we expect in the coming year that appreciation levels will moderate somewhat to between 12 and 15 per cent. But we still consider this a buoyant market," he says.

The early investors in the region were drawn to properties located along the Western Cape's extensive coastlines because of the stunning ocean views and relatively peaceful surroundings, but these properties are now out of reach for the average investor looking for a second property.

Consequently, Joyce says most foreign investors are now looking at the many property developments taking place in Cape Town's city centre, which is currently being rejuvenated by major developers, such as the Irish company Eurocape.

"Cape Town's city bowl is currently experiencing a major rejuvenation with many commercial properties being converted into residential ones," he says. "So, the bigger developments that investors can choose from are located here."

Most properties currently on offer from the Pam Golding Property Group in the city bowl (as Cape Town's city centre is called) are one, two and three-bedroom apartments that range between €125,000 and €500,000 in price, and are located in apartment blocks which also house various public amenities.

And, according to the experts, the properties yielding the best rental returns can be found in the €125,000 to €250,000 end of the market, with owners receiving between €650-€800 per month.

"The rental return from properties valued in the upper end of the market is not so positive, with profits starting to come down a bit when compared to previous years," says Joyce.

Wendy Clarke, the owner of Durr Holdings, believes there are significant savings to be made when buying apartments in Cape Town once you are flexible in relation to location, because the apartments situated in the outer suburbs can be far cheaper than those in the city bowl.

"The price range of similar sized apartments in the city bowl and the suburbs can vary significantly. In the city there is a premium to be paid because of the proximity to amenities and social activities.

"In the Durbinville area of the northern suburbs apartments are typically going for around €112,500 but in the city centre the same sized property can cost around €187,500," she maintains.

Clarke also agrees with Mick Joyce's view that coastal properties are now priced at a premium.

"Even if one were to drive an hour from Cape Town along the less sought-after western coast, the prices are still high.

"There is a lot of development taking place in sleepy places like Langebaan along the western coast, but even here a plot of land can cost as much as €130,000 now, compared to the €60,000 price they were three years ago," she claims.

In relation to charges, foreign investors should take note that as well as the market price of a property, they will also have to pay a transfer duty cost, which runs at 8 per cent of the value of the property.

When selling a property, the capital gains tax for foreign investors runs at 25 per cent.

Safety issues have always been a major concern for property investors in South Africa due to the extremely high crime rates the country has experienced since the collapse of apartheid in 1994. Last year alone the number of murders in the country came in at just under 20,000, which happily was a reduction on previous years.

Clarke says that investors must view the installation of security systems as "a must" when buying a property, and the cost of maintaining the security system, in relation to apartment blocks and complexes, is included as a complex levy.

Nevertheless, Chris Mahon of the Irish/South African Association, who has lived in Cape Town for 10 years, insists that he has never felt overly threatened while living in the city.

"There is awful crime here that can manifest itself as senseless violence, but it is a demographic problem and the authorities are really trying to tackle it," he says.

This view is supported by Joyce who says huge strides have been made in making Cape Town's city centre safe for the influx of new residents the redevelopment has been bringing in.

"The safety in the city compared to a few years ago has normalised to a great degree. Yes, we still have incidents of muggings so you must be aware that all the normal advice one would take as a tourist still applies," he concludes.