One province in South Africa set for property boom

The Western Cape property market is set to benefit greatly from green shoots in South Africa’s economy, with municipal and provincial infrastructure investment propelling the province into the country’s leading investment and economic hub.

Spear, a real estate investment trust (REIT) operating in the Western Cape, said this in its recently released interim results for the six months through August 2024.

The company reported a decent performance, with property revenue growing to R308.93 million compared to R293.70 million the year before.

The REIT’s profit for the six-month period grew from R115.99 million in 2023 to R117.11 million.

However, the company’s basic earnings per share fell by 11% to 44.97 cents, and headline earnings declined by 3.37% to 38.73 cents.

The company said the first half of its 2025 financial year was spent focussing on successfully navigating the country’s challenging trading environment.

Its management team built on the rising tide of tenant activity year-to-date to actively drive down portfolio vacancies, in particular within Spear’s commercial portfolio. 

“The HY2025 period has not been without its challenges, but in the same vein, has emerged as a period of renewed optimism and hope for all South Africans,” the company said.

Spear said the formation of the Government of National Unity and the absence of load-shedding had been good for business overall.

In addition, amid the country’s extremely tough trading conditions, Spear’s Western Cape-only portfolio remains well-placed to benefit from a shift in real estate fundamentals geographically.

Spear explained that municipal and provincial infrastructure investment continues to propel the Western Cape into the leading investment and economic hub in South Africa, and the property sector is set to benefit.

Spear expects continued tailwinds created by economic growth, positive effects of semigration and good governance to boost the province’s property sector.

Semigration – moving to another location within a home country – has boomed in South Africa over recent years, with the Western Cape, in particular, benefitting.

Spear said consistent and growing net property income bodes well for consistent asset valuation growth within its core portfolio.

The company warned its positive outlook could be influenced by factors like the return of load-shedding or civil unrest in Cape Town or the Western Cape in general.

However, considering the current economic green shoots, Spear’s management expects its full-year distributable income per share to grow by between 2% and 4% in the 2025 financial year.

At the start of 2024, FNB property strategist John Loos said the Western Cape property market is set to benefit from the rising trend of ‘semigration’ as South Africans search for regions where “things work”.

In FNB’s Property Insights Note, Loos identified municipal and utilities service reliability as a key theme for 2024. This comes as rising rates and tariffs pressure net property operating income.

Municipal rates and utility tariffs continue to rise at rates well above general inflation, further putting pressure on net property operating income. 

“While we assume a better year for electricity supply, we expect that the search for areas and regions where ‘things work’ is likely to remain a key feature in the current market in 2024,” he said.

This feature will cause considerable household and business activity ‘semigration’ to continue into 2024 – and the Western Cape property sector is set to benefit from this.

Semigration is expected to boost the Western Cape’s economy and its property market.

As such, the Western Cape is expected to continue to outperform the rest of the major commercial markets in 2024.

In 2023, the Western Cape saw the strongest growth in house price inflation among the three major regions in South Africa, and Cape Town was the only major metro housing market where prices stabilised rather than declined.