For more than a year South Africa’s property market has been furiously treading water against very strong economic tides, so it is understandable that real estate bosses were desperately digging for oysters in this week’s State of the Nation Address.
And while they did find a few in President Cyril Ramaphosa’s speech, only time will tell whether they contain any pearls of recovery, not only for the market but the country.
Words like “optimistic”, “inspiring”, “exciting”, and “good news” have been used in the reactions of property moguls, but these have mostly been followed by “buts” and “howevers”. Plus, the fact that this is an election year cannot be overlooked when evaluating just how thick the layer of SONA’s glossiness is.
Yael Geffen, chief executive of Lew Geffen Sotheby’s International Reality feels that while, on the face of it, Ramaphosa’s second SONA was upbeat and would most likely be broadly hailed as good news for the country, it would take just a single scratch to the glossy coat of paint to reveal the sharpness of the precipice below.
After all, the Eskom and the country’s other state-owned enterprises (SOEs), still pose what economist Erwin Rode of Rode and Associates calls “a fatal risk to the South African economy”. The good news is that Ramaphosa admits this in his address.
“Eskom is in crisis and the risks it poses to South Africa are great. It could severely damage our economic and social development ambitions. We need to take bold decisions and decisive action. The consequences may be painful, but they will be even more devastating if we delay.”
The problem though, Rode says, is that it is unclear how the problem will be solved.
Another concern is that while the government’s foreign investment strategy attraction “seems to be on track”, Geffen says: “We can attract investment and shout the good news, but when the global money and the investors arrive in South Africa, we have to start the narrative with the bad news of how operational costs will drive their profit margins into the ground because the power utility is broken and that they’ll have to pay staff more to cover basic bills at home.”
More bad news, she says - referring to Ramaphosa’s reiteration that government was going to drive through the amendment to Section 25 of the Constitution that will confer on them the right to expropriate land without compensation - is that if investors sink billions into land and create infrastructure, “we’ll also have to tell them they’re in the same boat as the country’s citizens and there’s no guarantee they’ll get to keep it or see a cent for it should the government decide to take it away.”
While chief executive of Greeff Christie’s International Real Estate Mike Greeff also noted the adamant reiteration of land expropriation without compensation, he is holding on to Ramaphosa’s commitment to prioritising food security and reforming agricultural land first. He is also optimistic following the President’s “substantial emphasis” on Eskom exploring sustainable and renewable power sources.
Echoing this Rudi Botha, chief executive of bond originator BetterBond, says the SONA shows that Ramaphosa and his team have been working “very hard” to increase investor confidence, economic growth, and job creation - the three things that higher home ownership and the increased personal wealth that this brings is dependent on.
“They have openly addressed and taken action on things that make potential investors nervous, such as a previous lack of clear policy direction in mining and land ownership, rampant corruption and the near-collapse of SOEs like Eskom.”
Similarly, Berry Everitt, chief executive of the Chas Everitt International property group feels that the SONA was “very optimistic and forward-looking”.
“We are excited by the announcement of several initiatives that will not only reduce the social housing shortage but significantly increase the number of South Africans who are able to build their own homes and/re-enter the formal housing market - if they come to fruition.”
These initiatives, he says, include the release of State-owned land in strategic locations that are close to work opportunities for housing development.
While Rode also welcomed Ramaphosa’s announcement that the Housing Development Agency (HDA) would be tasked to build an extra 500 000 houses over a period of five years, he notes: “This amounts to about 100 000 per year, which is a drop in the ocean.”
“However, the fiscus simply cannot afford to expend more on ‘give-away’ houses. Thus, it is to be welcomed that the People’s Housing Programme will be expanded.”