I was having a look at the ‘net and came across this headline: SA property sector worth R4.9-trillion
I know, I felt like that as well: So much property and so little in my name. It happens to all of us!
But, that got me thinking about our country and the industry…………
The South African property industry is significant in many respects:
- Property rights are secured in our Constitution and we trust that it will stay that way.
- The Deeds Office nationally is functional and does relatively well in securing our property rights as well as the rights of our financiers.
- Our property law is well established and we produce outstanding conveyancers and property experts in many fields of the property market.
- It is very well managed with a number of globally competitive property funds that own significant amounts of property on behalf of shareholders.
- Our estate agents are highly skilled and requiring of continuous training and development in order to stay at the top of their game. Estate Agencies, are widespread and whilst the large franchises dominate, there is still room for the smaller business owners to ply their trade off the back of excellent exposure and/or relationships in their community.
- We are building property across the spectrum of requirements, from the poor to the aged and up to the rich. Whilst the process could be much better, developers are getting access to land, and we hope ever-improving, to electricity which was a real issue a few years ago.
- In our cities we have leafy suburbs and our own “Hollywoods” and, by and large, we live safely though behind some very high, secured walls.
Not a bad situation to be in as a country. Yes it could be better, our cities could be better managed in key areas of delivery, our poor ramshackle areas could be revitalised and our informal settlements are a blight on us, but it is probably fair to say that we have a good property industry overall. In fact, I would be prepared to call it a significant and contributing national asset.
The CEO of the Property Sector Charter Council, Portia Tau-Sekati, presented excellent research to the industry in September. The sector contributes significantly to the country’s economy and in 2009 comprised 8.3% of gross domestic product (GDP), according to a South African Property Owners Association research report entitled “The economic impact of the property sector in South Africa”.
According to the Charter Council’s study, only 1% of the country’s land is urban and residential, about 73% is natural pasture, approximately 12% is agricultural and the remaining land is comprised of conservations and reserves. Two-thirds of the property owned in South Africa is residential and worth R3-trillion, while commercial property is worth R780-billion. Undeveloped land that is zoned for development is valued at R520-billion and publicly owned property, including national, provincial and local government and state-owned enterprises, is worth R570-billion.
“Retail property has the highest value of the commercial property sectors in South Africa at R340-billion, followed by office properties at R228-billion and industrial properties at R187-billion,” the Charter Council reported. “Representing a small comparative value of R25-billion is hospitality, leisure and ‘other’ property.”
According to SAinfo reporter, the study will be an annual one and the Charter Council aims for it to become the benchmark against which progress in the industry is measured. “The study is a useful tool for understanding the South African property market and its dynamics,” Tau- Sekati said.
To read more go here.
I make my point again against the backdrop of this recent and defining research that South Africa can be very proud of its property industry.
Against this backdrop, the SARB’s decision to hold off on an interest rate hike late last month augers well for the industry. Inflation figures will be announced today [19 October 2015] but are expected to remain within the 3-6% range so no serious danger there. Of course, the whole world seems to be waiting for the USA rates decision and we have the unfortunate matter of the weak Rand, ostensibly because of the US$ strength. There is no doubt that the SARB decision, as much as it would like to raise interest to protect the Rand and still inflationary fears, is set against the context of South Africa’s dismal economic growth. That will probably be revised to a 1.5% forecast but it is, at best, hovering unacceptably low.
John Loos, FNB’s Property Economist, speaks to the interest rate and makes valid points as usual. Firstly, a gradual rise in interest rates prevents any need to over-react later and keeps lenders and borrowers cautious. Secondly, he makes the point that lending does not grow the economy but only productive lending does that with any sustainable effect. Finally, he states the obvious that we all need to hear: Indebtedness is not good for our economy [and back pockets] and we should use the low interest rates as an opportunity to reduce our household debts as quickly as possible.
According to Private Property, Cape Town has the most exclusive properties and precincts of incredible value. Private Property, quoting Lightstone research, reports, “Cape Town may not be the financial epicentre of South Africa but it continues to dominate the list of most exclusive addresses and data has revealed that the Mother City lays claim to three of the five most elite addresses in the country. According to the Lightstone research, the most expensive street in South Africa currently is Nettleton Road in Clifton, where the median price for houses is R27.1 million, followed by Glen Beach Road in Camps Bay with an average house price of just under R24m. Head Road in Fresnaye takes fourth place with an average selling price of R21.44m. Sandhurst in Johannesburg scoops third and fifth places with a median sale price of just under R25m in Coronation Road and R20.76m in Rivonia Road. In the list of most expensive addresses in the Western Cape, not surprisingly, four of the five most pricey are situated on the sought-after Atlantic Seaboard, with fourth place taken by Eastcliff in Hermanus.
Lew Geffen says: “The upswing on the Atlantic Seaboard started in 2002 when a property in Chilworth Road in Camps Bay sold for R23m, but the demand for luxury homes really began to peak 2008 when 13 properties in the R20m plus price band changed hands to the combined value of R414.193m.” “In spite of the credit crunch which hit in 2008, property values on the Atlantic Seaboard have continued to grow exponentially and now it is not only home to the most trophy properties in South Africa; it also fetches the highest price per square metre.”
Closing on this article, Cape Town may be home to the most luxury properties in South Africa, although data from New World Wealth shows that Johannesburg still has the most Dollar millionaires in the country.
So there you have it, Cape Town has the properties and Johannesburg has the money. Like Homeloan Junction’s excellent service, some things never change.
Yours in Property