Property & Wealth

The property sector keeps on performing

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Land remains an emotive issue in South Africa. But the real estate sector contributes much to our national economy.

Land is not only emotive, but also central to the debate about continuing inequality and to the urgent need for accelerated transformation and the thorny issue of restitution.

To get to grips with this sector’s impact on our daily lives, we need to, as a point of departure, understand what the real estate sector consists of and just how much it contributes to the national economy.

Being budget time, it is timely to analyse the extent and economic value of this vibrant sector. In this regard, a prime source of reference is the Property Sector Charter Council (PSCC), an umbrella body that includes the Estate Agency Affairs Board (EAAB), which also plays a pivotal role in regulating estate agency affairs, fidelity fund certification and related matters.

Key stakeholders and role players

The PSCC board has 19 seats to give voice to four primary stakeholder groups:

  • Nedlac and organised indirect stakeholders represent communities, labour, women and youth with four seats;
  • The public sector has five seats to represent all three tiers of government and state-owned enterprises;
  • Property services are also allocated five seats to represent the interests of brokers, estate agents, facility managers, property managers and valuers; and
  • With five seats the various owner classes are also well-represented on the Council board.

The PSCC itself consists of an amalgam of representative bodies to ensure the sector’s representative body reflects the views of its entire constituency. The obvious industry and professional bodies are well represented, including:

  • the EAAB (Agents Board), IEASA (Agents Institute), NAREA (Agencies); SAFMA (Facility Managers), SAIV (Valuers), and SAPOA (Property Owners);
  • AWIP (Association of Women in Property), SABTACO (Black Technical & Allied Careers), SASAIBPP (Black Property Practitioners);
  • APUTMC (Property Unit Trusts) and PLSA (Property Loan Stock); and
  • NDPW (Public Works) and NEDLAC (Economic Development and Labour).

Regulatory environment

In 2013 the PSCC commissioned first-time research to investigate the actual size of the real estate sector in SA and the findings, published in the Agent Magazine of May 2014 were then, and still are, pretty staggering.

Tellingly, the Council’s CEO, Portia Tau-Sekati, was then quoted as saying that: “Aside from the fact that no reliable figures have existed on the size and impact of the sector before this, in a sector this big and this important as property there should be ample opportunity for transformation to take place.”

She further pointed out that the first phase of the research set out to measure the size of the property market and secondly its financial and economic revenue. Thirdly, it measured and analysed the transformation of the sector using a broad-based BEE tool with eight elements contained in the property sector code.

Subsequently the minister of trade and industry revised the Broad-Based BEE codes that reduced the elements of the scorecard to five, being:

  • Ownership;
  • Management;
  • Enterprise and supplier development;
  • Skills development; and
  • Corporate social investment.

Of these, the priority elements of measurement are ownership, skills development and enterprise and supplier development.

Size and value of the property market

Based on the Council's pioneering research, it was estimated in 2013 that the monetised value of the SA property market then exceeded R4.5 trillion: 

  • Two-thirds of this was residential, valued at R3 trillion;
  • Commercial property was credited with a value of R780 billion;
  • Undeveloped land zoned for development equated R520 billion; and
  • Publicly owned property – including national, provincial and local governments as well as state owned enterprises’ property portfolios – came to around R570 billion.

In the commercial property category, the report indicated corporate-owned property accounted for R600 billion, which included the R120 billion estimated to be held by SA’s listed property sector and the investment in property held by pension and private equity funds, estimated at R180 billion.

While the value of the residential category was generally agreed to be the heavyweight at R3 trillion, the source studies varied considerably when estimating the number of housing units in our economy, formal and informal, as somewhere between 8 -13 million units.

The private property sector was further reckoned to generate financial and economic revenue of R238 billion, which amounted to a GDP contribution of R192 billion and to a combined tax income of some R46 billion – residential property contributing nearly R124 billion, non-residential about R106 billion and end of cycle R7.9 billion.

Interestingly, based on available information, the report indicated that publicly owned property was also considerable, and comprised:

  • R188 billion held by the national government;
  • R342 billion held by the nine provincial governments;
  • R37 billion held by local government; and
  • R6 billion held by State-owned enterprises (SOEs).

In his budget speech on 24 February, Minister Pravin Gordhan underscored the high value of the property market in the national value chain, by allocating a further R108.3 billion to housing.

It is almost as if he echoed our sentiments that the government can best wage its war on inequality and poverty by investing considerable resources in the development and stimulation of the asset class most people value the most – their homes!

by Eve van Basten

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