The South African Property Owners’ Association (SAPOA) held its annual conference in Cape Town in June, where a panel of experts told the audience that there were still plenty of long-term property investment opportunities in South Africa.
Evan Robins, a listed property manager for Old Mutual Investment Group’s MacroSolutions fund emphasised the fact that property is a long-term investment in any country – not just South Africa. “The economy may be weak now, but things will improve, and growth will return," he said.
Barnaby Fletcher, a senior analyst at Control Risks, said the major risk to investing in South African property was still policy uncertainty relating to the politics of the country. “We are hopeful that Cyril Ramaphosa and his new government can quickly publicise and then implement clear policies,” he said.
Panel member Preston Mendenhall is the Executive Vice President at Rendeavour, Africa’s largest urban land developer in cities such as Kenya, Ghana, Nigeria, Zambia and the DRC. Giving a broader African perspective, Mendenhall said that these locations gave higher potential returns partly because these cities were grown from low bases, in addition to the fact that there was strong employment growth and associated infrastructure development. In comparison, he explained that South Africa simply doesn’t have projects of similar sizes.
Then, of course, there’s the network of players already in the South African property development industry including Growthpoint and Redefine, who are difficult to compete with due to their established presence.
Locally, we believe that the SARB will most likely be keeping interest rates steady due to a volatile exchange rate the on the 19th of September 19 after a .25% cut in July’s meeting. SA’s economy is expected to escape recession in the second quarter however did contract by in the first quarter of the year.
So, while the commercial real estate sector still leads the African continent, developers are having to be increasingly savvy to generate attractive returns. While the market’s maturity and sophistication compares with any developed market, investors still need to be discerning about which opportunities they take on in order to make their interests worthwhile.