Imagine the possibilities.
Author: Matimba Masinga, Director and Founder of Matimba Properties, a property investment company that focuses specifically on student and commercial properties in townships
The landscape of the property township market has dramatically changed since 1994, while in the pre-1994 era property in townships did not any value at all, post-1994 we have seen a steep increase in value and in demand for township properties and in particular townships that are located close to industrial areas, the CBDs and close to former homeland Universities such as the University of Venda, Tshwane University of Technology (TUT) in the north of Pretoria and University of Johannesburg in Soweto. The development of malls and shopping centres is another contributing factor towards carrying the momentum for township properties and those who have invested in these areas have seen great returns. Then why have we not seen significant investment in student accommodation, office blocks and skyscrapers in the township of South Africa?
My personal view is that townships like Soweto have increased their LSM so much so they can no longer afford to be called townships but are rather, suburbs.
For example, the Soweto property market has ballooned in the past few years, with some properties breaking the million Rand mark in value. No wonder some investors with a high level of foresight are rushing to buy up as many properties as they possibly can. We’ve even seen people who bought properties in the Northern and Southern suburbs of Johannesburg in the early 90’s, only to return to townships. This can be attributed to a number of factors:
1. Social interaction in townships is still intact – instead of travelling every weekend to see family and friends some people are opting to rather return to townships and stay there permanently.
2. Access to amenities such as malls, private schools and a good public transport system like the City of Joburg’s Rea-vaya bus service has been on the rise since the early 2000’s.
Despite these major investments in the retail and residential space, we have seen very little investment in the commercial and student accommodation sector. Investors in this sector have yet to fully take advantage of the opportunities that townships have to offer. Picture, for example if an MTN or Standard Bank were to set up a call centre office park in townships, and thereby save hundreds of their employees’ eye-wateringly high transport costs, as well as the headache of having to wake up early to catch a taxi to the CBD and the suburbs. In return, you would see better quality of life, increased production in the workplace and generally happy employees, but most importantly you would see a major reduction in traffic.
What is the solution?
In the past Government has incentivised investors in order to attract investment to specific sectors of the market, through the issuing of tax debates, reduction in municipal rates and taxes and providing bulk infrastructure that would enable the private investors to see the putting in of their own cash as a great value proposition.
Given that the problem of student accommodation is at crisis level and more so in former homeland and township Universities, Government could use the rebate and incentive method to attract much needed investment in these areas. And then naturally these investments come with other related secondary investment such as entertainment, office and work spaces, a second-hand vehicle industry and many others.
The investment in student and commercial properties in townships can be a catalyst and entry point to township based economic activity.
One major factor why listed property fund managers and developers have not been investing anything but retail projects and low-cost housing in townships is simply lack of well researched and packaged data that would allow them to make informed decisions. The other reason is that developers are still stuck in their old ways of thinking. They see view townships as a low LSM project deserving of noting but retail and low-cost housing.
If we are to the change the landscape of post democracy townships, we need to change the way we fundamentally view this market. We need bold visionaries who are not afraid to break the mould. The question now is, who will be bold enough to be the first step in breaking the stereotype. There’s no doubt that whoever puts their money where their mouth is will benefit the most from this highly unrealised market.
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Matimba Masinga is the Director and Founder of Matimba Properties, a Property Investment company that focuses specifically on student and commercial properties in townships. He’s also a director at Topsido Junction Consultants, a consultancy firm that helps property investor manage and mitigate risk in non- conventional property projects in townships.