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Open letters to government from industry heads

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Tony Clarke, Managing Director of Rawson Property Group and Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, urge government to open up the industry.

Here are their letters

An open letter to President Cyril Ramaphosa from the Managing Director of the Rawson Property Group

Dear Mr President

As MD of the Rawson Property Group and an active member of SA’s community of real estate professionals, I would like to applaud your decisive action to date in response to the coronavirus pandemic.

Ours is a service industry that revolves around people, this is true, but our industry has the ability to operate and deliver a lot of its services remotely.

The health and safety of those people is of paramount importance to us. As we enter week seven of a lockdown originally intended to last for 21 days, however, I must add my voice to those asking you to consider more than just your citizens’ physical health. When it comes to human necessities, we have a number of primal needs.

Maslow’s famous hierarchy lists the most essential as air, water, food, sleep, clothing, reproduction, and shelter. Shelter. The very thing around which the real estate industry revolves. By keeping real estate services on lockdown, you have – albeit unintentionally – restricted your citizens’ ability to service their most basic of needs.

The South African property market meets the needs of many South African households and businesses. From a residential perspective, it not only provides shelter for families but also provides a place from which economic activity is derived.

Properties reflect probably the single largest asset owned by South Africans. While the real estate industry is in lockdown, most homeowners will not have the ability, nor the opportunity to generate income through the sale and letting of their assets. Besides the lack of income, without the ability to trade with your asset, property values will drop, leaving property owners with a significant loss in individual net asset values.

The lockdown effect has also caused countless other dire consequences for many people that are currently on a property purchase / sale / rental journey – let me elaborate on some: New buyers have been unable to finalise their transactions and take occupation of their properties.

Where registrations have taken place, prior to lockdown, those buyers have now been given permission to move into their new homes but cannot as the seller’s of those homes cannot find a property to move to as real estate activities are still “locked down.”

Current tenants have been unable to secure new rentals, leaving new tenants unable to move. Homeowners have watched the value of their properties take hit after hit.

Both homeowners and tenants have been unable to downscale to stay out of debt, and may find themselves not only without shelter, but food, clothing and other basic necessities as a result. In short, the revision of the regulation allowing buyers and tenants a once off moving right, has little to no effect in itself, unless people can actively source a new property to move into.

On the commercial front, those industries allowed to operate have been unable to meet their operational space requirements, whether to expand, contract or simply meet social distancing needs.

Those still under lockdown have been unable to liquidate property assets to keep paying their staff. Let’s not forget real estate professionals. The majority are small, family businesses, but all estate agencies – big or small – rely entirely on commission and are, therefore, not eligible for UIF or any of the support packages that other industries are able to access. Many have received zero income since the closure of the Deeds Office in March and will not see another cent for at least two months after it reopens and then after those properties have registered, there will be no further income for months thereafter while the real estate industry remains closed– an unnecessary hardship for people in an industry that is fully able to operate under the strictest social distancing and sanitisation protocols.

This situation isn’t unique, either. Plenty of other professionals are in equally dire straits thanks to the closure of real estate. Plumbers, electricians, and other maintenance staff have lost a significant portion of their workload. Banks (Mortgagees), property valuers, conveyancers and moving companies are at a complete standstill until property sales recommence.

Even industries like construction rely heavily on residential sales to stimulate demand in their sectors. Without the resumption of real estate activities, all of these people – your people – will soon be unable to meet their own basic needs.

A recent poll indicated that upwards of 85% of all respondents to the poll would not be able to continue operations should the lockdown continue for another month. This could have a devastating effect on all South African homeowners that would want to sell – whether willingly or out of financial desperation – as a significant number of qualified Real Estate professionals would have left the industry.

But perhaps you, like many, believe any negative effects of a continued real estate shutdown will be limited to South Africa’s financially privileged. The formal property sector is out of reach for a large proportion of our population, after all.

The fact is, the upstream and downstream value chains of real estate have proven to be so far-reaching that the sector is estimated to be responsible for 6% of our total GDP. Preventing its operation will have dire consequences for our entire economy, and the first to suffer will not be our wealthy, but our poorest and most vulnerable communities as many jobs will be lost, and one job-loss dominoes into more job losses.

Mr President, I am the first to acknowledge that your task is mammoth, the rewards few, and the consequences great. I wholeheartedly support your efforts to protect your people from the ravages of a medical crisis that remains terrifyingly difficult to quantify, let alone overcome.

I beg of you, however, to resist the urge to err too far on the side of caution, to the detriment of your economy and the people of our great nation. By preventing the real estate industry from reopening – safely and responsibly, with full social distancing and appropriate PPE in place – you add little to health security of your citizens, and much to the hardships they face.

Instead, we ask that you let us work. Work to protect our people’s greatest assets. Work to maintain vital value chains that provide employment for over a hundred thousand South Africans. Work to give shelter and hope to countless South Africans. The Property Industry has the ability, and the Statutory bodies to ensure that operations can commence with great care to the safety of our agents as well as the community of people urgently requiring our service to liquidate and/or monetise their property assets by being able to trade.

Together, we can overcome this virus, keep our people safe and our economy afloat.

But only if you let us work.

Tony Clarke, MD of the Rawson Property Group

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Industry leader and CEO of Lew Geffen Sotheby’s International Realty Yael Geffen issues an urgent plea to government.

The time for prevarication is over and government needs to move now if the real estate industry is to navigate the Covid-19 storm and retain its significant economic position as a key contributor to South Africa’s annual Gross Domestic Product (GDP) and provider of upwards of 100 000 private sector jobs.

So says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, on the back of a second urgent real estate industry submission to government last Friday detailing why realtors should be permitted to offer professional services under Level Four Covid-19 restrictions.

The submission by the organisation representing real estate business owners and addressed to the Ministers of Cooperative Governance and Traditional Affairs, Trade and Industry and Human Settlements, noted: “Estate agents in South Africa hold professional qualifications and are widely recognised as professionals, including by the South African Revenue Services… The exclusion of estate agents from this category is anomalous and without foundation.

“Estate agents in South Africa require far less direct physical interaction with members of the public than has ever been the case in the past and indeed, such interactions are in fact quite minimal… In current times, most property sales originate through the display of information online through property portals … This is not only a highly efficient way of doing business but also has the effect that it reduces, to a very significant degree, the need for direct physical interactions between estate agents and members of the public.”

A study by UCT’s Urban Real Estate Research Unit was attached to the submission, which alarmingly noted: “Residential real estate transactions could be around 45% lower in 2020. This would result in a decline of R4,2 billion of commission lost with a multiplier impact of R 8,1 billion across the national economy.

“Based on the survey, some 86 % of (1 550) respondents suggested that they would not be able to reopen if the lockdown of the sector carried on for more than one (more) month.

“Some 43 % of the output value is generated through the acquisition of inputs. A further 55% of the value is derived through value-added (wages, profits, taxes and incentives) and 2% through net taxes. The I-O tables also suggest that the real estate sector (from a gross value-added perspective) is responsible for 6% of total GDP.”

Geffen says time really is of the essence if the industry that facilitates the trade of fixed assets in South Africa valued at nearly R4 trillion, is to survive.

“Agents have already been in lockdown for six weeks during which time very few, if any would have managed to secure even a fraction of the number of mandates that would have been the norm just six months ago.

“For an industry that is almost entirely commission-based it’s now a crisis. Even if estate agents secure sales on the first day post-lockdown, it’s likely to be at least another two months before they receive any commission from the transactions.

“The president is asking us to blindly accept decisions from a hastily constituted body of ministers in his so-called National Command Council, but they’re not accountable to anyone and won’t explain why they’re putting the livelihoods of 100 000 private sector employees on the line.

“It’s nonsensical and certainly isn’t in line with the leadership the President has shown in handling the Covid-19 pandemic thus far,” Geffen concludes.

“If this regulation does not change imminently our sector will be facing an entirely new crisis with dire consequences.”

CEO of Lew Geffen Sotheby’s International Realty Yael Geffen

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