Assessing deals in an expensive market

What are the measures of success in an expensive market where the 1% rule doesn't apply?

My main motivation for property investing is for income generation so that I can have the properties cove my expenses and not have to work, but choose to work on my own terms. Initially my plan was to just put my savings into ETFs, but through Bigger Pockets I've come to realize that when run as a business property investing could make sense.  

I'm trying to land my first investment property deal and I'm located in an expensive market, Cape Town, South Africa, where the property prices have almost increased by almost 20% per year for five years. But prices have softened a bit since last year. I'm only really able to afford a bachelor flat in the market I'm currently renting in, Green Point. And basically a 2-3 bed apartment in more suburban areas. 

Most deals around the CBD (including Green Point) offer a 0.65% monthly gross rental yield at best. Should I be reframing my thinking to include appreciation into the model and break-away from a solely buy-to-hold strategy? Or can it never work in an expensive market and should I keep on hunting for a 1%-er further out or even long-distance?

It just feels like the rules that I keep on learning about buying below retail (at 10% to 30% discount), having it cash flow less operating expense (at almost 40% of gross rent) aren't applying to this market. Are am I missing something? 

My landlord wants to sell the falt I'm currently living in. It's a great location, but it would require serious renovations (R200,000+) to get a higher gross rental of R10,000 pm (instead of the current R7,300 pm). (The currency is South African Rand). But compared to the top-end finished of the new build it looks like post renovations I would have paid R44,000 per square meter compared to R66,000 per square meter of the new build, so a third less). Would that make this a good deal? 

Thank you for your time!