Black property businesses feel the impact of Covid-19
DURBAN - When there were market shocks that led to economic devastations like the current Covid-19 pandemic, black originated companies tended to suffer the most because they were less insulated with no diverse sources of funding and general infrastructure.
South African Institute of Black Property Practitioners (SAIBPP) chief executive Vuyiswa Mutshekwane said that while no one had actually studied the impact of the pandemic on the sector, industry projections showed that there would be a 40 percent decline in transaction value in the commercial market with the biggest impact felt in office and retail as some companies were defaulting on leases. “While there is fewer than 10 percent black ownership in the sector, those black originated businesses will be the worst affected and unlikely to withstand the beating. Even those in facilities management will suffer because they have a small client base,” said Mutshekwane.
SAIBPP’s chief executive said that while the pandemic had brought great economic suffering, it had exposed South Africa’s poor and inadequate housing and how the country had not invested enough in their building. "This then creates opportunities for the property sector’s developers and investors."
Mutshekwane said that in the new economy, black developers should be put in the forefront. "We do not mean that we want hand-outs. Our members have demonstrated that they understand the solutions to South Africa’s (housing) problems better and could deliver. The industry should be deconcentrated and create a platform for black entrepreneurs," said Mutshekwane
ENZA Construction, a member of SAIBPP recently constructed the new 500 bed Pixley ka Isaka Seme Memorial Hospital in KwaMashu, KZN which was unveiled last month.
The institute said that issues for black entrepreneurs were around funding and access to finance as not even one development finance institution(DFI) funded black property entrepreneurs making them unable to get capital or equity to pursue developments. Mutshekwane said this was a huge problem to accessibility for equity to allow black participation even for old black originated companies in the sector. She added that for property entrepreneurs to approach the bank, they had to have at least R1 million rand.
"The fight is not for the 30 percent government tenders. The fight is about asset ownership and the ability to create wealth because without wealth we cannot do anything," said Mutshekwane.
In a recent report prepared for REBOSA (Real Estate Business Owners of South Africa), property economist Professor François Viruly of the University of Cape Town Urban Real Estate Research Unit said that policy interventions in the real estate sector should take cognisance of the unique business and economic characteristics of the residential real estate sector.
"The residential estate sector is characterised by relatively small, vulnerable, family enterprises which rely entirely on transactions and commissions as a source income. The lockdown of the sector also has a profound impact on lower-income households who are dependent on the sector to secure homes and rental properties," said Viruly.
The unit added that the South African property market met the residential and commercial needs of South African households and enterprises. Viruly wrote that from a residential perspective, not only did it provide shelter for households but also provided a place from which economic activity was derived. He said that many first-time homebuyers were presently waiting to buy property and move into more secure houses with their families.
"First-time home buyers make up about 50 percent of the market. Properties reflect the single largest asset owned by households. In the present economic environment, the property market provides households with the opportunity to generate income through the sale and letting of properties. The ability to transact in the residential real estate sector also provides individual flexibility to adjust financial commitments such as reducing mortgage bond and rental payments".
Professor Viruly said that it was worth highlighting that 60 percent of all transactions in the South African residential property market relates to properties valued at less than R1 million. The property sector affected local economies in the smaller and larger cities of South Africa.
Following a survey survey with some 1, 550 estate agents across the country, Viruly said that from an economic perspective and based on the multipliers calculated including a recent forecast from FNB (May 2020 Property Barometer) suggested that residential real estate transactions could be around 45 percent lower in 2020. This would result in a decline of R4,2 billion of commission lost with a multiplier impact of R8,1 billion across the national economy. The number of employment opportunities would, according to these figures and employment multiplier, exceed 13,000 employment opportunities.
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