There is, says Tony Clarke, Managing Director of Rawson Properties, the real estate group which is now operating on a national footprint, a wide variety of opinions '˜out there on how the global economy will perform in 2011.
South African property marketers, he says, have to be aware of these opinions and form their own assessment so that they have a realistic plan for the coming year.
'Those to whom I have talked are, by and large, in two camps,' says Clarke. 'The first group sees the world economy as being over the worst and set for a slow, albeit unspectacular, recovery. The second group believes that this could take five to eight years'
The factors which, says Clarke, most commentators agree will influence the future are:
· the economic crises being experienced in the less successful Eurozone countries. Requiring massive bail-outs, in some cases these, he says, could retard the entire European economic performance.
· the possible political unrest in China as an increasingly affluent society begins to resist authoritarian state control. This, says Clarke, could be coupled to excessive consumerism in the Chinese market and difficulties experienced by the regional authorities to repay the central banks for the massive upgrade and improvement infrastructural programmes which they have been obliged to implement as part of Chinese economic policy.
· the USAs apparent reluctance to deal with its '˜hugely excessive debt - and a growing belief that they probably never will. This, says Clarke, will inevitably weaken their economy, which, in turn, will impact on the entire global economy, especially the Third World suppliers, such as South Africa, which are the major providers of primary minerals and materials.
· the international energy crisis. The shortages and high prices of fuel in todays market could, Clarke believes, hold back a true economic revival.
· water and food shortages coupled to floods, droughts and increasing desertification, all problems related to global warming and international weather changes. These, says Clarke, could be especially severe in the countries fed by the Himalayas where the melting ice and snowcaps have traditionally supplied one-third of the worlds population with water.
· poor education in much of the Third World, especially in Africa.
· a lack of finance for new enterprises, particularly those in the Third World, which are essential for a global recovery.
'Accepting that 80% of new businesses do not survive their first two years but that the remaining 20% do make a big difference to any economy, the funding agencies for new enterprise have to find means of backing and encouraging innovative entrepreneurs. Regrettably at the moment development funding worldwide, but particularly in Third World, is severely lacking'
South Africa, says Clarke, is not immune to many of the problems outlined above, but, as a result of its conservative fiscal policies, has proved fairly resilient in the face of the global recession. This, he says, is impressing international economists and investors.
'Now, however,' he says, 'the question is what steps should be taken to stimulate real economic growth to an acceptable degree - and the answer, in my opinion, is '˜boost the property sector'
This, says Clarke, could take two forms: making home acquisition easier and increasing the delivery rate of subsidised state homes.
'On the first issue, the credit criteria of banks are so strict that in recent months only 55% of bond applications have been successful. While it is true that this is 5% up on the previous rate, it is far below a situation in which homeownership growth will help seriously improve the economic recovery'
Older people, trying to survive on increasingly inadequate state and private pensions, says Clarke, and young people with limited funds and no credit records to be consulted have been especially hard hit by the strict lending criteria.
There is, he believes, a need for a range of alternative home funding schemes, many of which are already used in developed countries. Among those are rent-to-buy (in which a portion of the renting period is converted into a deposit to facilitate an acquisition), instalment paying (in which a deal is struck between the homeowner and the buyer who goes ahead without the assistance of a bond), private syndicate funding (again, a direct deal between the syndicate and the buyer) and staircase funding (in which the monthly bond repayments start low but increase later as the homeowners salary improves).
Many in the property sector believe, says Clarke, that they must now link-up with consumer bodies on behalf of aspirant buyers to put pressure on banks to ease up on their lending criteria.
'Right now,' he says, 'highly reputable bond applicants who have often been in the same job for many years and have conscientiously paid their debts over a long period are sometimes disqualified from getting bonds on grounds that appear to an outsider to be illogical. In some cases so many guarantees are required that the bond is, in fact, secured one and a half times over.
'In view of the very high interest rates charged by South African banks (in relation to international rates), this cautious approach does not appear to be justified'
Delivery of state housing, says Clarke, could improve if more land was made available and reputable private sector developers were allowed to initiate projects on these. Again, he believes, the banks should agree to come in as partners, the guarantees in this case, coming from the government.
Clarke says that the situation in the housing market is reasonably satisfactory and he himself is predicting 3% to 3,5% real growth, i.e. above the inflation rate, for house prices in 2011.
Clarke stresses that in addition to its economic benefits, homeownership, or even simple home occupation, can have great human advantages. They increase self-respect, stimulate ambition and create social stability.
'The provision of satisfactory housing should, therefore, be a high priority of every government,' says Clarke, 'and should be seen by banks as one of their primary responsibilities. It is time they found ways of doing this to a greater degree'
For further information contact Tony Clarke on 021 658 7100 or email tony@rawsonproperties.com.
