Private Property - Kerry Dimmer • May 15, 2019
Finally the wait is over. For the past six months, the country has been holding its breath, awaiting the outcome of the national elections so that South Africans can realise some stability and hopefully re-establish investor confidence.
With a 57.7% majority achieved in the national elections, the ANC retains power, and Cyril Ramaphosa his Presidency. What this means for the residential real estate industry is business as usual, but hopefully with improved buying and selling opportunities as consumer confidence begins a slow journey of restoration.
We approached five of the top agencies in the country for their opinion, comments and predictions: Herchel Jawitz, CEO of Jawitz Properties; Sandy Geffen, executive director of Lew Geffen Sotheby’s International Realty and Geffen International Realty Franchises; Gerhard Kotzé, MD of RealNet; Dr Andrew Golding, chief executive of the Pam Golding Property group; and Myles Wakefield, CEO of Wakefields Real Estate.
Q: With no real surprises in election outcomes, do you think investor confidence in the residential real estate market will improve?
Herschel Jawitz: The elections continue to reinforce that despite some of the political challenges facing the country, South Africa continues to be a vibrant and rigorous democracy. I think that while there were no significant surprises, the results of the election at a Provincial level show that voters are using their vote to hold the politicians accountable for policies and their behaviour. In both the Western Cape and Gauteng, the dominant parties both lost support. I think this accountability and the shifts in support are positive for the country and should be viewed as such by consumers and investors.
Sandy Geffen: Investor confidence will certainly improve as everyone was awaiting the outcome of the elections and now we have certainty. In my opinion, Cyril Ramaphosa is the man for the job; he has proven himself to be a game-changer for the ANC, with at least 20 people, with bad reputations, having been re-deployed. From this point, I think Cyril Ramaphosa will continue to act in the best interests of the country and we expect to see more re-deployments and replacements, and the appointment of honourable and competent people to government.
Gerhard Kotzé: Firstly we should not underestimate the value of having come through another “free and fair” democratic election. Many South African and foreign investors were very worried about the possibility of violence erupting during and after the elections, and this has depressed confidence in the economy and in property for some months now. However, political continuity has been guaranteed for at least the next five years and we believe that SA is now in the best political hands in decades, and that President Ramaphosa will lead a structured and transparent effort to achieve the changes that need to be made in order to regain investor confidence and retain the country’s international investment rating. Nevertheless, we think that local investor confidence will only fully recover once the Land Expropriation Bill and its proposed implementation, and potential consequences are transparently detailed by the ANC. Thus we foresee a rather slow and “let’s see what they say” recovery in the property sector rather than a huge surge as investors pile money back into the sector.
Dr Andrew Golding: The generally market-friendly election outcome will in all likelihood create a degree of certainty and stability and go some way towards addressing the issues currently affecting confidence in the South African economy, and as a consequence, will have a positive effect on the SA residential property market. This viewpoint is illustrated by the fact that, as per the Pam Golding Residential Property Index, since 1994 we have consistently seen an acceleration in house price growth in the months following a general election.
Myles Wakefield: The property market thrives on certainty, and with the election behind us – with no undue surprises – we are assured of a strong leader and a relatively clear way forward. I’m certain that this will be the catalyst needed to restore investor confidence.
Q: Post-election, are you prepared to predict any change to the current 'buyer's' market conditions?
Herschel Jawitz: I believe that market conditions will start to shift now that the elections are over. Even though no one expected major shifts in support, markets don’t like uncertainty and that includes the residential market. Consumers will be watching to see what steps the President takes to root out corruption, fix Eskom and stimulate the economy. Consumers and buyers have been in a ‘wait and see’ mindset for some time now and are looking for signals that things will improve.
Sandy Geffen: We expect the market to normalise as we have been in a self-induced recession over the past two years, which has been sentiment driven, thereby causing pent-up demand which should release itself going forward.
Gerhard Kotzé: I personally think that we are going to remain in a buyers’ market for some time because we are still experiencing low GDP growth and job creation, and the state of the economy is not going to change overnight just because the elections are over. We have an oversupply of stock in the real estate market currently and that is not going to be absorbed unless the economy picks up and more jobs are created to enable more buyers to afford their own homes. Having said that, the Rand has strengthened against the Dollar, Pound, and Euro on the back of the election outcome. Investors have been piling back into local stocks and bonds, and I think that it will not be that long before President Ramaphosa has cleaned house and we are back on a healthy growth path for the SA economy. This will solve many of the challenges that we currently face in the property industry as well.
Dr Andrew Golding: While it is anticipated that, in the wake of the favourable election outcome, the residential property market will rebound, in reality, any significant recovery is only likely to materialise in the later stages of the year after the seasonally quiet winter months. We believe that with a shortage of accommodation for students and retirement developments in different parts of the country, that activity is likely to be brisk in these market sectors, while the lower end of the market is likely to continue to hold up well relative to other sectors of the market. It is also anticipated that smaller sectional title properties will also perform better as a result since this sector is often favoured by students, first-time buyers and down-scalers.
Myles Wakefield: For the past year or two, the political and economic rollercoaster on which the country has been riding, has largely meant the market favoured buyers. Confirmation that the next five years will see some of the government’s Big Promises realised, should result in that playing field being levelled somewhat. This won’t happen overnight, but as we see corruption rooted out, damaged SOE issues resolved, Eskom stabilised, and numerous other massive concerns settled, confidence will be restored and those buyers who’ve been perched on the fence, will dismount. Unlike most other purchases, buying a property involves a great deal of sentiment. That lack of confidence has created a hiatus in decision-making for buyers, and I’m sure that as everybody exhales, equilibrium will be restored in the marketplace.
Q: What are the forthcoming residential property market governance/regulatory/legislative issues that you believe the government will be dealing with?
Herschel Jawitz: The key issues facing the residential industry other than subdued market conditions are the Property Charter and the Property Practitioners Bill, which regulates the industry. Both will have a significant impact on the industry in terms of transformation.
Sandy Geffen: The only regulatory issue that could affect the market would be the signing-in of the Property Right’s Bill. While we are all for urgent transformation, a few clauses in the Property Rights Bill are draconian which could hamper forward progress vis-à-vis the proposed arbitrary enforcement of partnerships and which could have unforeseen consequences.
Gerhard Kotzé: The two biggest legislative issues that will affect the property industry and the residential property market in particular this year are the long anticipated Property Practitioners Bill and the Land Expropriation Bill. The Property Practitioners Bill is going to require even more compliance from an already heavily regulated property sector and some uncomfortable adjustments in regard to estate agency ownership, which might translate into a shortage of qualified property practitioners and/or estate agency owners to mentor interns looking to enter the real estate industry as a means of employment. Even though this is a long-awaited and necessary evolution for the local property industry, the corporate type of approach followed within the Property Sector Codes remains a challenge when it comes to implementation in the residential real estate industry, which is based on commission-only earners and entrepreneurial ownership.
Dr Andrew Golding: A number of specific questions arise, including how the land reform question will play out in terms of policy amendments or variations and also whether or not other market-friendly reforms are introduced.
Myles Wakefield: The key piece of industry-related legislation on the table, is The Property Practitioner’s bill, but that is clearly directed at internal aspects of the industry, not the homeowner or the market. This Bill, contrary to affecting the residential property market, is destined to change the way the industry is regulated from the perspective of the industry’s stakeholders and role players such as real estate agents and firms, as well the current industry regulator, the Estate Agency Affairs Board, due to be renamed the Board of Authority.
Q: Do you think the government will escalate decision-making on the Land Expropriation Bill, and what, in your opinion, do you think will result?
Herschel Jawitz: It remains to be seen to what degree the government will implement the Land Expropriation Bill. The issue of land ownership will continue to be a key part of the fixing South Africa’s political, social and economic landscape and cannot be ignored. What isn’t clear at the moment is how such a policy will be implemented and this uncertainty will weigh negatively on the residential property market.
Sandy Geffen: Land expropriation is the elephant in the room at present. Depending on how the land is allocated will determine the future success of the policy. I believe that Cyril Ramaphosa will have the common sense to do it in a way that will be efficient and non-threatening but of course land has to be transferred at the end of the day.
Gerhard Kotzé: The highly sensitive Land Expropriation Bill and land reform in itself has the ability to either promote private land ownership in SA or contaminate the concept and potentially cause large scale disinvestment by both foreign and local property investors. We remain optimistic that this complex and volatile topic can be dealt with successfully by Government. If so, it should hopefully stabilise our country and go a long way towards mending the divide that it has caused among thousands of disillusioned and angry South Africans.
Myles Wakefield: There’s been enough talk around this Bill, and it’s now time for absolute clarity – to avoid repeated unsettling of the populace and the property market - and then action. It’s been stated that the process will begin with the vast land reserves owned by our government, and I believe this should not be tangled up in endless red tape, but be fast-tracked. The time for rhetoric is over – South Africans are weary of it, and the government knows that. I have faith that our savvy president will put a strategy in place that will accommodate South Africans, while not ignoring the inestimable contribution which local and international investors make to our country.