The town lies picturesquely in a wind-protected bay, surrounded in the west by the Karbonkel Mountain, the famous Mount Sentinel as the outpost in the sea and in the east, by the Constantia Mountains and Chapman's Peak.The name "Hout Bay" (Wood Bay) was given by Jan van Riebeeck, who, after his landing in Table Bay in the year 1652, found dense forests providing the timber needed for the construction of ships and of the Castle.
In 1681 the first farms - Ruyteplaas and Kronendal - were established in Hout Bay.
The fishery on a commercial scale only developed a hundred years later. In 1904 a canning factory was opened, which in the following years gave Hout Bay's economy its boost.Hout Bay is the centre of the crayfish and snoek fishing industry, and its fishing harbour gives the little coastal town a lively atmosphere. But today, its main economic contributor is tourism. After all, the attractions of this beautifully situated place are numerous.

Other than hiking, sailing, surfing, kayaking, fishing, cycling, having a picnic or suntanning at the beach, there is not much one can't do in Hout Bay. And the scenic Chapman's Peak Drive, the harbour, the bird park and Seal Island are all part of it. That is why over the last years many new settlements, apartments and mansions have been built, many of them as holiday homes for people who initially came as tourists from Europe.