How a lifted ban on “weed” can boost a city’s home values
Category Blog
My imagination as a residential property marketer was captured last week by an interesting feature in the Mail & Guardian. It was focused on the seemingly imminent legalisation for the use of marijuana for medical – but not yet recreational – purposes in South Africa. The Medicines Control Council (MCC) has already begun to regulate medical marijuana, according to its law enforcement manager Griffith Molewa. He adds that the MCC expects to release regulations for the cultivation of medical marijuana for public comment by the end of the year.*
So, what relevance, if any, does this have for the homes market in Johannesburg’s Northern Suburbs and Sandton? Or, for that matter, in the rest of the country’s Metros? Since no precedent has yet been set in South Africa, the experience of Denver, Colorado may well be a good indicator.
Growth in property values
The phenomenal growth in property values that took hold in Denver following the American State’s vote, in 2012, to legalise recreational marijuana, has virtually become legend. Marijuana growers and processors flocked to Denver when the ban was lifted. So, too, did both residential and commercial property investors and speculators. They did so at a time when warehouse vacancy rates in the city had peaked, and home price trends were reportedly languishing.
But the potential was there for all to see. So much so that, by 2015, the doors of over 200 marijuana retail stores were open for business in Denver. Behind them was an abundance of cultivation and processing facilities – many of which were reportedly located in and on converted residential property.
Denver house prices soared
It all came together to make Denver reportedly the USA’s de facto ‘pot’ capital. From 2010 to 2014, house prices in Denver soared by 17 per cent. (In neighbouring cities, such as Colorado Springs, the increase was around 5 per cent by comparison). Furthermore, homes for sale became less and less available in Denver’s real estate market as marijuana growers and processors bought and converted them into production facilities.
Availability of affordable housing units for middle income residents virtually dried up. Homeowners who did wave a ‘for-sale’ sign in the homes market attracted multiple offers that often resulted in bidding wars. This is an unprecedented issue for South Africa. And it is still unfolding – albeit at a snail’s pace. Therefore, there are no historical guidelines on its possible implications for our residential property market.
What about South Africa?
Could the same real estate phenomenon unfold in Johannesburg and other South African cities at some stage in the future when and if recreational marijuana gets the legal nod – albeit inevitably on a smaller matrix than the Denver experience? It’s an off-the-wall call to make – but I certainly believe so. At this stage, however, Jozi homeowners with an entrepreneurial flair would be wise to avoid pulling up the summer seedlings to prepare their flower beds for the sowing of marijuana seeds. Well, at least for the foreseeable future. But it is worth bearing in mind.
*Source: Mail & Guardian
Author: Ronald Ennik
