The October 4thand 5thSummit Meeting at the Sandton Convention Centre called for by the Minister of Human Settlements, Tokyo Sexwale, to review the modus operandi in the property industry and to plot a new way forward, could be one of the most important meetings ever arranged for those working in this sector.
This was said recently by Tony Clarke, Managing Director of the Rawson Property Group, which has 180 franchises in South Africa and neighbouring countries. Clarke himself will be attending the Summit Meeting.
Sexwale’s department has recently been given control of the Estate Agency Affairs Board and, said Clarke, the first item on the summit’s agenda will in all probability be the steps that now have to be taken to get the EAAB’s affairs in order. This, he said, will be seen as imperative by most delegates.
“A forensic investigation by Deloittes, initiated by the Minister himself, has reported that R728 million was spent by the EAAB in a ‘fruitless and wasteful’ way and those attending the conference will definitely be expecting a further explanation on these matters and assurance, that if criminal activities have taken place, those responsible for them will be prosecuted.”
“Then, too, they will want to see a new board elected and this time they will insist that it comprises of competent people genuinely qualified and experienced to initiate the right steps forward.”
Clarke said that the various regional branches of the Institute of Estate Agents in all the provinces have public spirited people on their committees, with the right experience to handle reform in the property sector They could, he said, either form part of a new EAA board – or come together as a new independent complementary body.
“The important point,” said Clarke, “is that it is now essential that these people now have the appropriate property backgrounds.”
Above all, said Clarke, these appointments must not be made on political grounds.
“Experience has shown that those elected for political reasons have almost invariably been the least able to help the property sector,” he said.
Among other issues which will be seen by delegates as crucial, perhaps the most important will be transformation.
“There is no lack of willingness in the industry to tackle this, but it is now quite clear that it will require government funding. The reason, as I have said before, is that the industry has always operated on a 100% commission basis. If we are now to take in trainees from disadvantaged backgrounds, they will in almost all cases need financial assistance for at least the first year, whilst they are trained and mentored. There is absolutely no way in which estate agents can carry these large extra costs as part of their overheads.”
As a corollary to this, said Clarke, the government must also consider establishing a fund for the entrepreneurial training of suitably qualified people (they need not necessarily have had a property background) in what he calls ‘business incubators’. These, he said, would qualify potential entrepreneurs to establish their own estate agencies. Clarke added that in his view these ‘business incubators’ should be under the wings of big brand groups which have been shown to be capable of improving the chances of the new entrepreneur’s success.
“A full scale review of the training mechanisms in the industry are now essential,” said Clarke. “Many of us now think that the new obligatory internship training results in qualifications, are no better than those previously obtainable by means of the Institute of Estate Agency’s examinations. These took place three or four times a year and they had the big advantage of enabling the trainee to operate as an agent from almost day one.”
“Under the new system, the new trainee has to be continually mentored by his principal or a qualified mentor, e.g. a fully qualified estate agent. The plain truth is, that in today’s estate agency world these people cannot spend the amount of time required on the intern. This training system is, therefore, very difficult to operate, especially now that the number of agents in employment has dropped from around 85,000 to below 40,000.
Also on the agenda, said Clarke, will be the EAAB’s Fidelity Fund Certificates – which at the moment is the cause of the radical discontent among most estate agents. It is crucial, he said, that these certificates are issued on time, i.e. by the start of every year and not months behind as has commonly been the practice to date. It is also essential that the Fidelity Funds’ finances should be open to public scrutiny.
“This fund has many millions in assets. However it has never functioned with complete transparency and over the last ten years it is alleged that large sums from the fund have been misused. Total openness on the fund’s finances is now essential.”
Yet another issue that will have to be debated, said Clarke, is the banks’ ‘exploitation’ of bond applicants at the lower end of the property market.
“Because the risk here is said to be far higher than those for middle and upper bracket mortgages,” said Clarke, “the banks are now charging interest rates of sometimes up to 5% above prime for mortgages in this sector. This is very definitely not acceptable. Many hope the summit will address this issue with government and put an end to this practice.”
Attention will also have to be given, said Clarke, to providing assistance in the gap market, i.e. for those who earn too much to qualify for a government subsidy and too little to get a bank mortgage bond.
A new arrangement is now also needed, he said, to help first time homebuyers who require 100% bonds.
“The suggestion has been made that the banks should guarantee the 10% shortfall between a 90% and a 100% bond,” said Clarke. “This, along with assistance to the gap market, would radically boost the entire housing market, because as buyers move in at the lower levels, those already there would be able to move up. This was a clearly discernible pattern during the time when the property market was flourishing and it would be heartening to see the pattern in operation once again.”
