Gauteng Business News

Send  Share  RSS  Twitter  05 May 2010

PROPERTY: Politics, Economics Drive Property Value in the Global World


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In a world buffeted by economic meltdown and ongoing globalization, the value of South African property lies just as much in building political stability and realising economic potential, as in generating income streams or cutting vacancy rates.
But all too often, politics and macroeconomics are seen as little more than an indirect or distant influence on commercial and industrial property decisions.

The 42nd annual SAPOA International Convention and Property Exhibition, sponsored by Nedbank Corporate Property Finance, aims to change that.

“We ignore politics at our peril,” says David Green of Pace Property Group and Chair of the SAPOA Convention Committee.

“The reality is that the public sector is one of the most influential players in the everyday operation of commercial and industrial property in SA.”

When a player is as large, well-resourced and geographically influential as government, he explains, it becomes a driver of not only property development, but also ongoing leasing and investment throughout the country.

“The same is true of macroeconomics – especially in light of the world economic crash in recent years,” he adds.

Indeed, property is in a position to positively impact the political environment, as Roelof Botha, economic advisor to PriceWaterhouseCoopers, points out.

“Property ownership has proven to be one of the mainstays of free enterprise democracies around the globe,” says Botha.

“Expanding property ownership to a broader base of SA citizens will serve to entrench respect for market principles, the creation of rental income and capital gains.”

A core benefit, he emphasizes, is that property ownership will help reduce income inequality. Some commentators – like transformation specialist Mamphele Ramphele – believe that the property market at large has not lived up to expectations of transformation.

“Neither the government nor the private sector – and that includes ordinary South Africans – has articulated a vision of a transformed property sector,” she argues, pointing to RDP housing and poor urban planning as examples of ongoing apartheid geography.

One powerful intersection of politics and economics is the impact of massive stimulus packages introduced by governments around the world to stave off economic crisis. The packages, says respected economist Azar Jammine, will raise the issue of excess liquidity in global financial markets while local indicators will add additional risk to property markets.

“High levels of household indebtedness remain a huge constraint to prosperity in the residential property,” he explains.

“For the non-residential sector, plans passed have started weakening perceptibly in recent months in lagged response to the recession.”

He believes that in both the residential and non-residential sectors, it will likely be some time before returns pick up significantly.

“In any case, one should not anticipate a return to the halcyon days witnessed earlier in the decade,” he adds.

In SA, adds Botha, the combination of property market development and higher property prices enhances the tax base of municipalities and supports critical service delivery. There’s a need to understand how other cities accomplished an effective balance between the two.

Former Mayor of London Ken Livingstone, perhaps best known for his introduction of the congestion charge as Mayor of London in the early 2000s, also worked to transform levy assessment rates, other property costs and business improvement districts in London.

“If you think about it, the lesson for SA cities is how London has been maintained,” says Green.

“Despite being a pre-Victorian city, London has kept up with population growth and increasing densification without losing its essence.”


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