Upmarket house sales suffer as land debate hits home
The expropriation question gives investors the jitters, leading to a drop in the sale of top-end properties
The luxury home market seems most shaken by “political noise” about expropriation without compensation, property experts say.
This intensified after President Cyril Ramaphosa announced on Tuesday that the ANC had decided to change the Constitution to allow for expropriation.
Selling upmarket properties has been a challenge for estate agents since December, said Cape Town-based property expert Toni Enderli. He said the land issue has negatively affected the property business over the past few months.
Enderli said the debate around land redistribution has left a lot of investors worried and hesitant, leading to a decline in the sale of properties in the top-end market of properties above R5-million.
However, he said there is not much change in the first-time-buyer market of properties under R1.5m.Enderli felt the land issue had not been approached well, and a lot of comments loosely uttered have scared off potential investors.
Sharing this sentiment is Louis Barbosa of Harcouts Rhino in Johannesburg, who said the government should clearly clarify what the amendment of section 25 of the Constitution will mean for home owners.
He said people are holding back on buying new properties. “People are worried that the process will be abused. This is a very serious issue that I think the government must exercise due care in addressing.”
According to Barbosa, one in four of the sales they recorded between April and July this year in the west of Johannesburg were sellers leaving the country. “Usually sales are due to people upgrading, downgrading or moving to a new area, but recently people were selling their houses because they were immigrating.”
He explained that most of the people who were leaving the country said the political climate and unstable economy pushed them to look for homes overseas.
Stuart Manning, CEO of the Seeff Property Group, said there is no need to panic because these are early days. “While not detracting from the seriousness of the announcement, it should also be seen in the context of the current political rhetoric in the lead-up to the 2019 general elections.“Bear in mind that the president and the ANC have reiterated that expropriation will be done legally and in pursuance of economic and investment growth,” Manning said.
But, he said, the poor economic outlook and lack of policy clarity around land expropriation has had an unfortunate impact on the property market in the form of increasing buyer hesitancy. This was very noticeable in the upper end of the market such as the Atlantic Seaboard in Cape Town, in terms of R20m-plus sales and sales to foreign investors/buyers.
Ian Slot, MD of Seeff Atlantic Seaboard, Waterfront and City Bowl, said that while it remained business as usual in the price sector below R8m for sectional title and below R18m for houses/villas, it should be noted that the combination of a poor economy, political noise and uncertainty around property ownership has certainly affected the luxury areas of the Atlantic Seaboard.
In these areas there had been a definite decline in the R20m-plus market as well as sales to foreign buyers.
Their latest property statistics showed that sales for the Atlantic Seaboard/City Bowl market for the six months to end of June 2018 were down year on year by about 20% in volume and about 30% in sales above R18m.“The slowdown has also resulted in a drop in the overall selling price for the Atlantic Seaboard, from around R9m during the first half of last year to R7.8m, and for the City Bowl the rate has dipped from about R3.9m to R3.7m,” Slot said.
He said sales to foreign buyers have declined by about 40% compared with two years ago, largely owing to concerns about the economy and property rights. At the same time, many foreigners had put their properties on the market.
The R20m-plus sector of the market had also declined by more than 40%, effectively taking R500m out of the market turnover.
A Joburg-based constitutional law expert, advocate Piet de Jager SC, said amending the Constitution will not be a quick and easy thing to do. “This is something that cannot happen overnight. I don’t see it being concluded within a year.”
He said there is a lengthy parliamentary process that needs to be followed before the amendment can be effected.
De Jager expressed confidence in the president and said he believed he will allow land reform to happen in a responsible and just manner. He also said he believes the matter of land reform has not been explored enough.Nedbank Group chief executive Mike Brown said the land debate itself has already had a negative effect on overall investor sentiment and, therefore, economic activity and job creation. He added that, so far, it has not yet directly affected Nedbank or the way it assesses credit for its clients.
“We fully support the democratic process and land-reform debate and the need for historical redress, but it is vital that this sensitive and important issue is handled properly to ensure no lasting impact on economic growth and food security.
“The announcement by President Cyril Ramaphosa seemed to pre-empt the parliamentary process under way,” Brown said. He highlighted that any proposed constitutional changes will still need to be fully debated and will have to pass constitutional and legal muster on multiple fronts.
“We feel it would be wise to wait for this process, rather than pre-empt this without the detail.”