Cape Town housing crisis? – Moneyweb

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JIMMY MOYAHA: It is Property Tuesday and we are going to be exploring the world of property investment in more detail, trying to see whether or not the numbers do still make sense.

There have been conversations around a housing crisis ongoing for quite some time; but despite this we’re going to be looking through to see if we can make sense of what the property landscape looks like at the moment.

I’m joined on the line by Lesego Majatladi – director at Gracht Asset Management, to take a look at this and see what to make of it. Lesego, lovely having you on the show. Thanks so much for taking the time.

Why would Cape Town be going through a housing crisis? We’ve seen a couple of reports around this. If we look at the property numbers and look at the properties being sold in Cape Town, if anything that sounds like a property boom. Where does the word ‘crisis’ start to fit in here?

LESEGO MAJATLADI: I think what’s happened is that there is a housing challenge, and my take on it is that for every challenge there’s an opportunity.

But there are pockets of civil society who have deemed it a crisis – and even certain parts of the media who’ve deemed it a crisis – and that’s how we’ve ended up with it being described as a crisis.

But I think it’s an opportunity for us to have really honest conversations about where we are and what is possible.

And so I see an opportunity for very honest discourse, and that hopefully gets us to a point where we in 10 years’ time can look back and have a very different-looking city.

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JIMMY MOYAHA: Lesego, let’s look at that opportunity in a bit more detail. Let’s look at the property landscape, particularly in a node like Cape Town where property demand is clearly outpacing supply – and that’s also driving up property prices.

We’ve seen a lot of comment that Cape Town is perhaps slowly, if not already, becoming unaffordable for regular South Africans with the influx of international buyers and international interest. Any interest in a property investment, especially given its long-term nature, surely means then that opportunity, as you refer to it, must be looked at, regardless of where it sits.

LESEGO MAJATLADI: Yes. I think what has happened is that, understandably, when people relocate opportunities in Cape Town, there is a focus on the most prime real estate.

So there will be a fixation on the Atlantic Seaboard, as an example. But that means that there are very few opportunities in a market like that, and understandably that creates a push up in the prices.

But I think what we need to be looking at are opportunities outside areas such as the Atlantic Seaboard, and looking into the CBD and the areas that surround the CBD.

That’s where I think there will be value going forward.

My view is that the residential areas on the Atlantic Seaboard are outliers in a broader market, and we shouldn’t obsess about that and look at other parts of the city where there is growth and there are opportunities.

JIMMY MOYAHA: Lesego, what about the areas of concern – not necessarily physical areas from a property perspective, but in property investments? We know that property is not exempt from being cyclical, like any other investable asset. What concerns you at the moment about investing in property at this stage?

LESEGO MAJATLADI: Well, having been part of a team that’s put a sizeable amount of money into the city, I would say that as things stand, one is quite bullish about what is possible.

But it’s one thing to invest in the asset itself; it’s what happens in the neighbourhood around the asset.

And so a big part of our work is coordinating working relationships with the city, with other landlords and developers in and around the area, otherwise you end up having developed an island and you can’t grow if your property is the shining light in the midst of chaos.

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So the big work is not just in the development, it’s in creating a precinct-wide approach to property development. That helps to mitigate whatever risk that there may be.

So that’s where one has to spend time in identifying opportunities; it is to figure out where are the clusters of people moving in the same direction, thinking the same way about how they want to treat their real-estate investment.

So I’d say if there’s a risk, it’s in being a contrarian in a space where everybody else is taking a counter view.

JIMMY MOYAHA: Lesego, before I let you go, I want to get your thoughts on how it is that you start to then think about the investment thesis for property.

We know that with commercial property, residential property, mixed-use properties, we’re now starting to see very clear segmentation in how these different areas of the property market start to perform. And something that you mentioned about being property investors – it goes beyond just buying the property, but understanding the environment around that property.

Are you seeing any particular trends around perhaps a particular segment of the property market that might be doing better than others?

LESEGO MAJATLADI: Well, I think it’s not there yet.

But what is definitely happening, especially in the Cape Town CBD, and is starting to happen thankfully in other parts of the country like Johannesburg – which I think dearly needs it – is the commercial-to-residential conversions.

I think there is, as we said at the beginning of our discussion, this huge demand for residential property and very often the land is not available.

And so if the land is not available, what is available is potentially commercial stock and opportunities to convert that.

So I think that that theme is going to be one which is interesting to look at for a while.

I think the industrial space – and you’ve seen a few players in that space where there are the last-mile players, the e-commerce players, who need the storage facilities to run their businesses – that story, I think, still has some legs.

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And so I think those two are the two that I would look at.

And the one that’s on the horizon locally – I myself have not quite wrapped my mind around it – is data centres and what that looks like, and what the demands are on infrastructure for that to happen, and how much of a pushback there will be from broader society against the demands that data centres have.

Read: Cape Town data centre growth puts SA planning rules to the test

But I think in time that is an opportunity that will be worth looking at.

But for now, we stick to our knitting, and our knitting is what we’re doing at the Golden Acre, which is residential conversion and retail.

Read: Golden Acre redevelopment enters retail phase

JIMMY MOYAHA: The property market remains alive with opportunity. It is about understanding that opportunity and understanding where your investment case lies for that, if you are in the property space,

We’ll leave the conversation on that note. Director at Gracht Asset Management Lesego Majatladi joined us to look at the property landscape in Cape Town and why it continues to boom.

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