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Eastern Cape residential rentals on the cusp of growth

Home Business Management Finance & Investment Eastern Cape residential rentals on the cusp of growth

DESPITE less than 300km separating the Eastern Cape cities of East London and Gqeberha (formally Port Elizabeth), the contrast in the residential rental property market could not be more significant.

That’s according to Letlatsa Lekhelebana, Portfolio Manager for the Eastern Cape at inner city housing financing company, TUHF, who said the areas these cities cover create a “multi-polar” economic situation that is shaping the future of development in the province.

“In the pre-pandemic days, East London had an active retail economy. This is hardly surprising given that the former has three levels of government based there – provincial; district; and metropolitan,” he said, adding that even though East London has a good base of government employees, the manufacturing sector has also been driving investment growth – with Mercedes Benz producing its C-Class vehicles for right-hand drive markets there.

“For now, the demand in East London seems to be holding. But we will only get a clearer picture once new stock becomes available.”

Gqeberha, by contrast, was already experiencing a shutting down of economic supporters in the area, Lekhelebana said, citing examples like a tyre manufacturer that closed, Aspen Pharmacare reducing its production lines, and one of the big five accounting firms closing its offices. “Sadly, things have been exacerbated in the wake of the pandemic.

“This certainly has negatively impacted the rental market resulting in high churn as people have to vacate their flats due to the economic pressures.”

On the plus side, Transnet National Ports Authority is planning to move its head office operations, currently split between Johannesburg and Durban, to Gqeberha. “[This] is expected to bring approximately 400 new families into the city [which] will provide a significant boost to the rental market – and hopefully is a sign of more things to come to the city,” Lekhelebana said.

Velda Derrocks, TUHF’s Regional Manager for the Cape region, said that despite the challenges in Gqeberha, with a new coalition government that has been established in the lead up to the pending municipal election, there appears to be a lot of optimism brought about by the change.

“Town planning for the area has always been effective, but like all municipalities, things were a bit slow due to people working from home in the earlier phases of the lockdowns and COVID-19 restrictions.

“Contributing to this optimism is the potential for student rental accommodation in Gqeberha, as the demand for student rentals in Gqeberha remains as high as in East London.”

Lekhelebana said East London continues to have good demand for residential units. “It is worth noting that we have achieved 100% let-up of a 46-unit development in Belgravia, essentially at the peak of the second wave of COVID-19 infections. This clearly indicates demand for well-located, well-operated, clean and affordable housing units.

“We are also working with a client on a new development in East London that will be completed soon and offer approximately 108 units. Once completed, the pace of let-up of this development will also tell us exactly what the market demand is now – and towards a post-COVID future.”

He said developments in the inner-city would continue to be driven by demand for student residents. “As such, the local government must do everything it can to ensure it is an attractive space for students by getting rid of vagrancy and reducing the amount of crime in the area. We also anticipate demand in areas closer to the industrial districts like Sydenham and Sidwell.”

Lekhelebana said TUHF would also be looking at other development corridors closer to the universities and campus areas such as the Medical School of the Nelson Mandela University and other areas such as Algoa Park.

“From an East London perspective, we will continue to operate in those areas that have offered us solid opportunities. Other potential areas for development include the West Bank, Chiselhurst, and Cambridge for residential units,” he said.

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