Green shoots of growth will be the antidote to damp homes market sentiment
Category Blog
“South Africa has learnt from the experiences of other countries – both from what has worked and what has not – and will not make the same mistakes that others have made” – President Cyril Ramaphosa, recently quoted in the London-based Financial Times (FT) on the controversial South African issue of land Expropriation Without Compensation (EWC).
He gave this assurance at a time when South Africa has entered its first technical recession since the global economic crisis of 2008/9 – with successive drops in GDP of 38% and 29,2% in the first and second quarters of 2018.
EWC “is no land grab”, says Ramaphosa. But it is certainly a long-drawn-out process – and our President is adept at playing the long game. And growth is too important to him and SA.
What is missing from the unfolding EWC agenda is any urban residential property component. At this stage, individuals are seemingly not concerned that their homes may be expropriated.
Looming chaos ahead?
However, the terminology – ‘expropriation without compensation’ – is harsh. It leads all property owners to wonder: “What is going on in South Africa? Is this the beginning of a replay of what happened in Zimbabwe? Is it the start of tracts of land being overrun? Is there chaos looming ahead of us?” In my opinion, it is absolutely not so!
However, uncertainty of this nature can cause a paralysis in the real estate transactional environment. And it is a massive environment!
Just how massive was revealed by Cas Coovadia, managing director of the Banking Association South Africa (BASA). He said R1,6-trillion of South Africa’s savings, salaries and investment are in loans for property and land!
It seems clear that President Ramaphosa will not decide on the policy and implement it early. We must understand his long game. He clearly doesn’t want to give ammunition to his opponents to enable them to challenge the policy and create a platform on which to upset the elections. Or so it appears. Even though an early EWC decision will be good stability confidence for the Rand.
The trigger
After all, there is an election that will happen somewhere along the way – probably in the Spring or Summer.
Having said that, I remain convinced that a real turnaround in the residential property market will manifest only when the ‘green shoots’ of renewed economic growth and sentiment can once again be seen clearly by the public / consumer at large.
That is the trigger that will cause the residential property market to respond. That is when the long-overdue market turnaround will gain traction.
Until then, home owners, buyers and sellers will be monitoring EWC in much the same way as economists monitor key economic indicators.
Author: Ronald Ennik
