Is Cape Town Experiencing a Housing Crisis? – Moneyweb
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JIMMY MOYAHA: It’s Property Tuesday, and today we take a closer look at property investment, questioning if the numbers still add up.
With ongoing debates about a housing crisis, we’ll analyze the current property market to see how well it fits this narrative.
Joining me today is Lesego Majatladi, director at Gracht Asset Management, to delve deeper into this topic. Lesego, it’s wonderful to have you on the show. Thank you for joining us.
Read: Cape Town CBD property boom reaches R12.8bn
What do you think is causing the housing crisis in Cape Town? Various reports have surfaced about this, yet the property sales data seems to suggest a booming market. How does the term ‘crisis’ fit into this context?
LESEGO MAJATLADI: I believe that while we do have a housing challenge, every challenge brings about opportunities.
Some civic organizations and elements of the media view it as a crisis, which is where this characterization comes from.
This scenario opens up avenues for discussions on our present situation and possible solutions.
Ultimately, I envision substantial progress in a decade, giving us a chance to reflect on a transformed city.
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JIMMY MOYAHA: Lesego, let’s expand on that opportunity. Given the property dynamics in Cape Town, where demand clearly surpasses supply, leading to rising prices, what insights can you provide?
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Many are concerned that Cape Town could be becoming unaffordable for many South Africans, especially with the increasing interest from international buyers.
In property investment, particularly because of its long-term nature, it’s crucial to explore available opportunities, regardless of their locations.
LESEGO MAJATLADI: Absolutely. It’s natural for newcomers to Cape Town to gravitate towards prime properties.
This inclination towards the Atlantic Seaboard results in a scarcity of options, which inherently pushes prices higher.
However, we should also look for opportunities outside the Atlantic Seaboard, especially in and surrounding the CBD.
I see that as the area where future value will emerge.
I believe that residential spaces on the Atlantic Seaboard are outliers; we should not focus solely on them but also explore other growing areas in the city.
JIMMY MOYAHA: Lesego, what concerns do you currently have regarding property investments? We understand that property, like any asset class, goes through cycles.
LESEGO MAJATLADI: As part of a team that has heavily invested in the city, I remain optimistic about future opportunities.
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However, investing in the asset itself is only one part of the puzzle; it’s crucial to consider the surrounding neighborhood.
Much of our work involves partnering with the city, other landlords, and developers; failing to do so may lead to creating an isolated project amidst upheaval.
Thus, the critical aspect lies not just in development but also in promoting a precinct-wide approach to property development, which helps to mitigate potential risks.
Identifying opportunities requires observing where groups of people are aligning in their thoughts and strategies regarding real estate investment.
A potential risk emerges from contrarian views that diverge from the prevailing market sentiment.
JIMMY MOYAHA: Before we wrap up, I’d like your thoughts on crafting an investment thesis for property.
We’ve noticed distinct performance segments developing within commercial, residential, and mixed-use properties.
For a property investor, it’s not only about purchasing property, but also understanding the broader conditions.
Are there any specific trends in the property market segments that are outperforming others?
LESEGO MAJATLADI: We haven’t quite reached that stage yet.
However, there is a noticeable trend in the Cape Town CBD, which is thankfully also beginning to manifest in Johannesburg – the conversion of commercial spaces into residential ones.
With the substantial demand for residential properties, there often exists a lack of available land.
If land isn’t accessible, converting available commercial properties becomes a practical solution.
This trend is likely to gain momentum.
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Moreover, the industrial sector, especially regarding last-mile e-commerce storage, shows significant promise.
Thus, those two segments deserve attention.
A potential future opportunity, which still requires careful assessment, lies in data centers and the associated infrastructure demands.
Read: Cape Town data center growth tests South Africa’s planning regulations
While it’s an intriguing prospect, for now, our focus remains on our current project at Golden Acre, which involves residential conversion and retail.
Read: Golden Acre redevelopment commences retail phase
JIMMY MOYAHA: The property market is teeming with opportunities. Understanding these chances and recognizing where your investments make sense is vital.
We’ll wrap up our discussion here. Lesego Majatladi, director at Gracht Asset Management, joined us to examine Cape Town’s property landscape and the ongoing boom.