Property Flash


Carel Kleynhans, the CEO of Divercity Urban Property Fund, is a proponent of investing in residential property across SA and Africa’s growth markets.

Divercity owns a portfolio of R3bn assets, mostly across Johannesburg CBD and also in other metropolitan areas. Its current residential property portfolio consists of 6500-plus affordable rental apartments, with complimentary office, retail, and educational space.

Key developments in Johannesburg include the 30-storey Towers Main in the heart of the Absa Precinct and Jewel City, which spans six city blocks and offers unmatched urban amenities in the CBD.

Kleynhans spoke to Property Flash in the lead-up to the African Property Investment (API) Summit which will be held in Melrose, Johannesburg on September 21 and 22, 2022.

While much of the world has embraced residential property as an asset class, Africa is sorely behind.

This is ironic given how important housing is in a continent with a young and growing population.

Commercial investors really should be focusing their money on building large housing developments as many African states urbanise more.

Kleynhans says some kind of formalisation of investing in residential property will help to harness returns from the residential asset class.

It makes up less than 1% of the listed sector, the market capitalisation of which is somewhere between R400bn and R500bn. The market capitalisation of listed residential funds: Transcend and Indluplace, as well as the housing portions of SA Corporate Real Estate and Octodec Investments, is less than R4bn combined.

“So it’s safe to say it’s currently less than 1%,” says Kleynhans.

But he explains that The Property Network (TPN) collects data from 1-million rental units in South Africa, and the combined value of all rental property in SA is over R800bn, which is twice the size of each of the  office and industrial investment property sectors in the country.

“So even though there is very little listed residential asset value, the unlisted industry is huge and very fragmented,” he says.

There are clear reasons why residential can be a sound investment in SA.

A block of flats offers low volatility and very predictable income streams.

“This is great for long term asset and liability matching, which is essential for pension funds and life insurers. The income streams track inflation and have been shown globally to be much less volatile than commercial property,” says Kleynhans.

Contrary to what critics say, residential property is not the most complicated asset class to manage.

“It is operationally more involved than other forms of property, but once you get the correct systems and controls in place and you do a good job with them, we believe it is more manageable to generate stable returns over a long investment term than in any other property asset class,” Kleynhans said.

He is committed to residential developments and amenities.

“If I had to put it in real estate in South Africa, I would put it in very well located affordable and mid-market residential rental properties which have access to exceptional amenities,” Kleynhans says.

Residential property also does not have to be mixed-use for it to work well, but it has to be close to other uses for it to be a high-quality residential investment asset.

Essentially, residential property is only worth what households are willing to pay for it, and typically, people are willing to pay less for housing that is far from amenities and places of work.

“The experiences of sub-prime and most crises have shown that housing that is far away from amenities and economic activity suffers more as households economise and prioritise proximity to these uses,” says Kleynhans.  

But unfortunately we won’t see numerous listed residential funds on the JSE and on other African stock exchanges in the near future.

“It is going to take several more years for the discount to net asset value of the listed sector to rerate and recover, driven mostly by the headwinds faced by the office sector,” says Kleynhans.

“Until that happens, the entire listed property sector will struggle. That said, I expect unlisted institution-owned residential assets to grow significantly in the next few years,” he says.

What are the challenges for investing in residential property in Africa then?

Kleynhans says the Africa conversation is complex. But in SA, the current two main challenges are one access to capital and lack of knowledge of the asset management community of the asset class, and two: non-inflationary municipal charges increases, though these affect all property.

Advertorial for API Summit

The API Summit 2022 will take place on September 21 and 22 at The Marriott Hotel at Melrose Arch, Johannesburg. The API Summit is the premier real estate investment conference on the continent and is expected to attract hundreds of guests as they look to network and collaborate in an effort to take African real estate forward.  Register to attend this year’s event at

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