The views expressed below are those of the writer in his personal capacity and may not necessarily reflect the views of Fine & Country as a national and international brand.
I played golf with some friends at Hermanus Golf Course on Wednesday. For the record, while the course was presented to the high standard the members have come to expect, my level of play was at best acceptable. One member of our four ball asked me whether we were seeing any positive growth and movement in the residential property market, and my simple response was lots of sellers, lots of interest from buyers, but not a lot of sales. His analysis of the situation was that the local property market may well be experiencing a perfect storm.
Collins English Dictionary defines a perfect storm as “an unusual combination of events or things that produce an unusually bad or powerful result”. According to the Urban Dictionary a perfect storm arises “when three events, usually beyond one’s control, converge and create a large inconvenience for an individual”.
Whilst the property market has always moved in cycles, specifically relevant to this part of the Overberg, over the course of the last year we have seen a number of events which have negatively affected the local market. These include the land protests which had cut off access to Hermanus, the ongoing discussions about land expropriation without compensation, the recent devastating fires, and an upcoming national election in 2019, the outcome of which is not necessarily as certain as it has been for the last 25 years.
As property professionals we really do understand why a potential buyer may well be waiting for May and the outcome of the elections. They know that in the lead up to this event the various political players will present their party manifestos as well their own opinions, which whether you agree with them or not, at least give some clarity as to future direction. Working and living in a known environment is so much easier and more comfortable than dealing with the uncertain and the unknown.
South Africa’s Finance Minister, the Honourable Tito Mboweni delivered his 2019 Budget speech on 20 February. He emphasised that his budget needed to support the President’s “ambitious agenda for our nation”, which is “an agenda that speaks to the South Africa that we can be”.
He indicated that economic growth is estimated at 0.7% for 2018, rising to 1% in 2019, and forecast to moderately strengthen to 2% in 2021. He acknowledged that “a robust debate on land is taking place in South Africa”. The government is supporting private sector investment in agriculture by emerging farmers by setting aside R1.8 billion for 262 so-called priority land reform projects over the next three years, as well as R3.7 billion to assist emerging farmers to acquire land on which to farm.
Access to social housing was also addressed with the allocation of R14.7 billion in 2020 and 2021 to two new conditional grants for the upgrading of informal settlements so that these households will have access to basic amenities. The Help to Buy subsidy will also help first-time homeowners to purchase a home, as R950 million is allocated to this pilot initiative.
The proof is always in the delivery, but the mere identification of the very real problems and the allocation of government funding to those problems will help to reduce uncertainty and allow a level of normality to return to the property markets. As previously mentioned in this column, sellers need to understand that their capital growth rates cannot continue at levels way above the economic growth rates for the country as a whole, and realistic expectations of growth and value will ultimately result in property sales.
Minister Mboweni ended his budget speech by saying that government was taking steps to fix both the fiscal position and state-owned enterprises. “Madam Speaker, this is a budget that plants a seed for renewal and growth”. It is encouraging that government are not burying their heads in the sand any longer and are recognising the need for renewal, for change and for growth.
Is the local property market experiencing a perfect storm? I believe so, but going back to the earliest recorded natural events and disasters is that the storms will always pass. No matter how long it takes, the good weather does in the end return, often accompanied by that natural beauty, the rainbow.
The social housing issues are being addressed (albeit slowly), land expropriation without compensation is not generally seen as a reality but rather as an emotive call for political action. The fires have been contained and the elections will be held in May. The removal of the contributing factors for a perfect storm will result in the return of better weather and that elusive rainbow.