SONA was upbeat but now is not the time for only words
A disenchanted real estate industry, many of whom say they have not seen the property market (particularly the luxury market) this bad in over 30 years – had one thing to say to President Cyril Ramaphosa after his State of the Nation Address – “a little less conversation and a little more action please”.
Despite an address that was upbeat, sentiment is that only action can change the tide of a nation in trouble. Some went as far as to say it was clear government could not fix the “broken economy’ and that the private sector had to step up to the challenge.
The highlights of Ramaphosa’s address included:
Land redistribution – the circumstances around expropriation without compensation would be spelled out,. On state land Ramaphosa said 44 000 hectares of state land had been released for land restitution and 700 000 ha of state land was still to be released this year for agricultural development.
A new smart city for one million people in Gauteng to be built in the next decade – ‘a real city rising from ground and going up’. It will be a smart, 5g ready and green-friendly city.
Government to put R64 billion toward student accommodation and a further R64b from private sector.
Ramaphosa promised action to fix SAA and says railway lines will also be prioritised. There will be Investment of billions to give a safe and reliable service.
#loadshedding to continue but Ramaphosa spells out a plan – adding that municipalities can produce their own energy from Independent producers.
Data costs to be cut plus free data to poorer communities – digital economy will be a driver of growth.
Prior to SONA experts held out little hope that the address would change the country’s and the international world’s negative sentiment – ‘unless real action takes place, the nation is tired or words – action is now needed’.
FNB commercial property economist John Loos said “words will not change much. Now is a time we need action more than words. There is no quick fix. For anyone to sit up and take notice there will have to be some concrete deliverables.”
Regional director and ceo of Re/Max of Southern Africa, Adrian Goslett said after SONA: “I am interested to see how many of these promises will come into being.
“While some might feel that the presidency has not done enough to solve the country’s most pertinent issues, others will have had their confidence restored by the solutions posed in this address.
“Though we might notice a positive upswing in market activity following the SONA caused by this renewed confidence, this momentum will wane if people become disillusioned by a lack of implementation. Only once his statements around lowering unemployment, improving economic growth and dealing with the Eskom crisis come into being, will we start to see a notable and sustainable change in the real estate market,” says Goslett.
“This country does not have an economic problem. It has plentiful resources and immense growth opportunities. There should be no reason we are not among the world’s elite economies. Unfortunately, we have too many people in positions of leadership who have a lack of integrity and a culture of greed and indifference. True change in the form of investment and economic growth will only come about if there is follow through on corruption and consequences for corrupt individuals. The other solutions President Ramaposha posed during his address will mean little to nothing if we do not get this right,” Goslett concludes.
Yael Geffen, ceo of Lew Geffen Sotheby’s International Realty, says “as expected the President’s opening address to Parliament lacked substance and would do little to boost domestic or international investor confidence”.
“The world would be forgiven for thinking they were listening to a rebroadcast of 2019’s speech; we’re in the same place economically and a year down the line the president is talking about the same things.
“Loadshedding is crippling the economy, corruption continues to plague government, our public service wage bill is bloated in the extreme, crime is rampant, the youth need employment and our economic outlook is dire, to say the least.
“The speech also failed to allay investor concerns about the future of private land ownership, which is going to be felt across the economy.”
In his speech Ramaphosa said government was ready to table an Expropriation Bill that outlines the circumstances under which expropriation of land without compensation would be permissible.”
Geffen says this push by the executive “borders on insanity while the government sits on nearly two million hectares of state land” that could be used for redistribution before touching privately owned property, especially in the current economic climate with the country facing junk status.
“The president admitted in his speech that so far only 44 000ha of state land has been released; a veritable trickle in the greater scheme of things. But very ambitiously we’re being told a whopping 700 000ha will be released in the coming year, which will be an administrative impossibility.”
CEO of Greeff Christie’s International Real Estate Mike Greeff said with regards to Eskom and load shedding, while it set to remain a constant in South Africa for the next few months, on the bright side it should be more predicative and less disruptive. “There is a goal to pursue renewable energy ie. Hydro-electric systems that can be added to small scale energy production. Eskom still needs to de-bundle into three sections with each section having its own board. It is unclear as to whether these divisions will be private, or state led. On the plus side, NERSA will be processing applications for alternative energy which makes it possible for more privately owned companies/entrepreneurs to take advantage of their skills.
“The subject of land appropriation without compensation was not as clearly addressed as I would have liked, however, it is a positive to note that 700,000 hectares of state-owned land will become available…. It is comforting to know, that for now, our privately-owned land is safe and this could be a bonus for international real estate investors.
Joff van Reenen, director of property auctioneer High Street Auctions, said “any turnaround now will come from the private sector and business is going to be working alone to pull this country from what can only be described as ‘disaster’.
“This private-public partnership Ramaphosa has touted ever since he walked into the Presidency hasn’t materialised so far and will never get off the ground as long as the government’s policies continue to actively deter investment confidence.
Herschel Jawitz, CEO of Jawitz Properties said prior to SONA that South Africans needed to manage their expectations of what President Ramaphosa would deliver in his SONA.
” The economic challenges, which to a large degree are being mirrored in the residential property market, are about a crisis in confidence. To fix this, South Africans – business and consumers – need to believe that the country and the economy will get better. That needed a SONA that promises a little, and most importantly, delivers on those promises however few they may be.”
Samuel Seeff, chairman of Seeff Property Group, said Ramaphosa’s SONA 2020 did not bring any “magic bullets” to solve the crises facing the economy. “While we are encouraged by the proposed actions around Eskom and energy creation, we recognise that the reality of at least another 18 months of load shedding is likely to keep the economy restrained.”
The Seeff Group expects a more positive year, but we are mindful that the property market will remain vulnerable to developments within the broader economic and political environment.
* This article was updated with new comment on Friday February 14, 2020.