I've come
to the conclusion that property in South Africa is now among the best bargains
in the world, in both absolute and relative terms. On this trip, I
stuck to Jo'berg and the Cape; it's a big country and I simply put myself
in the hands of my fairly numerous South African relatives. I can't make
any recommendations on Jo'burg property because although it's cheap, I
can't see the opportunity, and have no personal interest in it. That's
not to say parts of Jo'berg aren't quite nice; the northern suburbs (Rosebank,
Sandton, Illovo, Saxonwold, etc.) are thoroughly white; you wouldn't know
these areas from any upmarket enclave in Europe or North America to judge
by the people in the stores and cafes. It's just that the whites are a
privileged enclave in a sea of much poorer people, most of them young,
many with chips on their shoulders, from a different race. And that reduces
its appeal considerably. The Cape has very different dynamics.
Two things
are driving real estate prices in the Cape
Two things
are driving real estate prices in the Cape: Immigration of whites from
the rest of South Africa, and of Europeans. Whites from the rest of South
Africa are drawn to the Cape partly because it's the prettiest part of
the country, and has the best weather, partly because it's already the
whitest part of the country, and that fact tends to draw even more whites.
And partly because it's where South Africa's four million Cape Coloured
live. The Cape Coloured are a thoroughly mixed blood group, with their
own ethnic pride and racial identity, who are generally allied with the
whites. They add some political balance to a country with about 6 million
whites and 32 million blacks.
The Europeans
are drawn by the same things, but even more by how incredibly cheap SA
is. South Africa is only a 10 hour overnight plane ride from Europe, and
there's no other place nearly as close that can compare. The increasing
tide of Europeans serves to reinforce property rights in SA, since it's
one thing for a government to steal things from its citizens, but something
else again with foreigners. I'll give you some examples from properties
I actually visited over several days, all roughly within a two hour drive
from Cape Town. I'm a big believer in unique property, and all these qualify.
Refer to CI90's for a full discussion of the whys and wherefores.
Oubaai
250 ha with
over 1 km of shore, mostly steep picturesque cliffs but with a fairly incredible
cove featuring a private beach. Only 12 km from George, this one should
become a hotel-golf complex, R13 million.
Sandy Cove
263ha with 1.5km seacoast, and another
prospect for development as a hotel-golf complex, in that it's already
part of the Mossel Bay municipality, and located between two European developments,
R16 million.
And the
clock is always ticking…
Knysna
Heads On The Western Cape
Kippie Horn
100 ha with
2km of beach, located 30km west of Mossel Bay, R4.3 million.
Property X
(I simply
can't remember its name), 696 ha with 1.5km of coast, including a large
home plus manager’s houses, located 18km west of Mossel Bay. This one is
somewhat cheaper because (unlike the others) it's not yet rezoned for development,
but should get about 50 building rights R4.5million.
To put this in perspective
A hectare
is 2.5 acres, a kilometer is .65 miles, and there are R7.2 to the US$.
Most of what I looked at were development properties, simply because I
can see what's likely to happen with white South African and European immigration,
I've been involved in this kind of thing quite a bit and I can do simple
arithmetic. Take Property X. I can't see getting hurt buying 1,750 acres
with a mile of drop-dead coastline in a great location for US$625,000,
especially since it includes a nice house. But if you take the time to
get the permits and put in the necessary infrastructure (in this case just
dirt roads and power), you should be able to move 50 lots at about US$100,000
over time, acquire some nice neighbors, net several million dollars, and
keep about 1500 acres for the future.
Will I do
it? Maybe. I think this is certainly the right time. And I have relatives
who I can trust to develop it properly for a piece of the action. Should
you think about it? Well, not only will you have to eyeball it yourself,
but also you'd do well to move there while it's happening. It's not what
you'd call a set-and-forget investment; although, it certainly could be
if you wanted to simply tie up the money as a property speculation.
Several years
ago I recalled what was actually the first international property deal
mentioned in my newsletter, the International Speculator, in the very first
issue, November 1980. At the time, the Leopard Rock Hotel, a fantastic
stone castle in the Vumba Mountains on the Rhodesia-Mozambique border,
was available for US$80,000.
Several colleagues
in the investment business said I was crazy for even mentioning such a
risky proposition. A couple of years ago, however, it was sold for about
US$8 million. I could have bought it in 1979, made a lot of money, and
had some great stories to tell. But I couldn't have done what I'm doing
now if I had, so I probably made the right choice. On the other hand, some
of my readers back then were probably just working for a wage, and still
are today; they should have gone for it. Choices. Choices. And the clock
is always ticking…
