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Here’s how property heavyweights weigh in on #Brexit

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Last week, Britons voted to exit the European Union, the fallout of which was the resignation of their Prime Minister, David Cameron, the pound’s biggest one-day devaluation to the dollar in 45 years, and a mass exodus of investors from emerging economies. The immediate effect of Britain’s exit from the EU – a process that is expected to take at least two years – remains unclear: at least when it comes to its ramification for South Africa’s residential market. But major players are divided in their opinions on the good, the bad and the ugly of the so-called #Brexit.

The good

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Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa

Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa.

“I predict that the ramifications of the announcement will be far greater on other foreign countries than it will be on emerging markets such as South Africa. It could result in other European countries deciding to follow suite and pull out of the EU, which will create an implosion of European economies.”

 

Stuart Manning, Seeff CEO

Stuart Manning, Seeff CEO.

Stuart Manning, Seeff CEO.

“According to leading local economists, the effect of Brexit on the SA economy and the knock-on for the property market is likely to be minimal and no more than the challenges already faced as an emerging economy with a currency under pressure.

“Having said that, what we have seen over the past few months, is that people are reading more ‘gloom and doom’ than the reality. The expectation is that Brexit will bring about no greater economic risk than what we are already dealing with: the threat of poor economic growth, rising inflation, rising interest rates, a weaker rand, shrinking household disposable income and rising cost of credit and home ownership. We would most certainly caution buyers and sellers against paying too much attention to naysayers.

“The flipside of Brexit could well be a further enhancement of South Africa as a very attractive destination for property investment. A weaker rand should bring more tourists, investment and property buyers as our already attractive property proposition becomes even more attractive.”

 

Richard Gray, Harcourts Africa CEO

Harcourts Africa CEO, Richard Gray.

Harcourts Africa CEO, Richard Gray.

“We strongly doubt that there will be a major impact on the local residential sale market. People understand that property is a long-term investment. History has proven that property is one of the very few investments that can weather global market storms.”

 

Dr Andrew Golding, CE of the Pam Golding Property group

Dr Andrew Golding, CE of the Pam Golding Property group.

Dr Andrew Golding, CE of the Pam Golding Property group.

“Some points of debate include whether Britain’s exit from the EU will result in short- or medium-term pound weakness and in the process make London property potentially less expensive and as a consequence, represent a buying opportunity for South Africans and other investors. On the flip side the attraction of South African property to British and European investors is likely to remain unchanged, although a weaker pound will make it slightly more expensive for UK investors. However, at this stage, this appears to be marginal.

“Overarching all of this is the indisputable fact that with uncertainty comes opportunity and savvy investors will see this opportunity and capitalise on it. In particular, South African residential property remains undervalued when compared with international locations such as London or Paris specifically, when comparing like with like, and so this continues to represent a favourable buying environment, notwithstanding the uncertainty around Brexit.”

 

Berry Everitt, CEO of the Chas Everitt International property group

Berry Everitt

Berry Everitt, CEO of the Chas Everitt International property group.

“Foreign buyers still don’t account for a very large slice of our residential property market, but the exchange rate is such that those buying in pounds and euros will still be able to secure great deals. Meanwhile, South Africa is attracting increasing interest from wealthy buyers in the Far East, Africa and the US who are also developing business interests here, and this is likely to balance things out.   “In addition, as the threat of the EU breaking up mounts, we foresee that many ultra-wealthy South Africans who were buying ‘golden visa’ properties in various parts of Europe will now stop doing so and may well choose to keep that money in SA, at least for the time being.”

 

 

 

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Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty.

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty

“We need to keep in mind, though, that global foreign ownership makes up a very small part of the local property landscape – less than 5% – and that the UK is only a fraction of that. I therefore don’t see this having an adverse effect on direct foreign property investment because other markets such as Africa, Russia and the Far East are expanding, but it could negatively affect the South African economy because of our exposure to the UK’s financial investment in the country.”

 

 

 

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Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa

“A sustained weakened rand will place further pressure on the Reserve Bank in increase interest rates. Again, as a result of the weakened rand and further pressure on the Reserve Bank, there is no doubt that interest rates will continue to climb, which will also reduce potential homebuyers’ affordability ratios.

“Home buyers will have to factor in the rising interest rates and ensure they have some financial cushioning. We could see many first-time buyers holding back and adopting a wait-and-see approach until the full effects on the South African economy are revealed. This is usually the case during perceived instability in the market.”

 

Stuart Manning, Seeff CEO

“We are already in an upwards inflationary and interest rate hiking cycle, so this could add further pressure. Having said this, the recent CPI data has been better than expected and it looks as if we will get another interest rate breather when the MPC meets in July, but this will obviously depend on how the currency behaves in the fall-out from the Brexit decision.

“The interest rate and a hike in the rate has a direct impact on the property market as, once the cost of borrowing and home ownership increases, the demand for property tends to drop.”

 

Andrew Golding, CE of Pam Golding property group

“What Brexit does, however, seem to have created in the short term is some instability and uncertainty in financial markets. This could have some macro-economic effects and lead to further rand weakness given that the inevitable flight to safe havens seldom includes us.”

 

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty

“In terms of the direct effect on the SA residential market, if the pound loses substantial value it will become more expensive for British citizens to purchase property here, but the long-term effect is very hard to gauge and I don’t think anyone can accurately predict at this stage the full impact of this decision on the English economy.”

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Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa

“Due to the fact that South Africa is highly reliant on imported goods, the effect on foreign currency could bring about further inflation pressure as the rand weakens. In short, with a weakening rand, imports will cost more and inflation will increase, creating a repetitive cycle. We will essentially be importing inflation.

“Global uncertainty usual results in banks becoming risk averse, tightening their lending criteria. As a result we could see access to finance becoming more difficult, as more stringent lending criteria are placed on the banks themselves. Not only will it be harder to get credit from a bank, it will more than likely also cost more, which will impact on consumers’ affordability levels.”

 

Steven Barker, head of home loans at Standard Bank

Steven Barker, head of Home Loans at Standard Bank.

Steven Barker, head of Home Loans at Standard Bank.

“While it’s difficult to comment on the impact on the Brexit outcome, this has added further uncertainty to the South African property market. The consumer is expected to continue to face pressure on household finances in a rising interest rate cycle. Negative moves in the currency market could lead to higher inflation which could put interest rates under further pressure.

“While we will need to see how this unfolds, consumer confidence remains low and the property market is starting to see a slow down in activity. Lending activities by mortgage providers is reflective of the interest rate cycle and the deteriorating economic outlook.”

 

 

Stuart Manning, Seeff CEO

“The effect on trade is likely to be minimal in export terms, but imports may well be more expensive as the value of the rand/currency takes a dip as we saw early Friday (24 June) morning with the rand falling by just short of 9% to a level even lower than the ‘Nenegate’ incident of early December. But, by midday, the ‘panic’ had subsided and the rand had recovered. What this shows, is that there tends to be an initial ‘panic’ before the markets settle down again.”

 

Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty

“The initial global reaction to the poll result has not been good for markets in general and South Africa is no exception, but this will probably settle down given a bit of time. The fact that the UK is such a big investor in the South African economy does leave us exposed because of the uncertainty, but no more so than many other countries.”

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david.steynberg@gmail.com

David A Steynberg, managing editor and director of HomeTimes, has more than 10 years of experience as both a journalist and editor, having headed up Business Day’s HomeFront supplement, SAPOA’s range of four printed titles, digimags Asset in Africa and the South African Planning Institute’s official title, Planning Africa, as well as B2B titles, Building Africa and Water, Sewage & Effluent magazines. He began his career at Farmer’s Weekly magazine before moving on to People Magazine where he was awarded two Excellence Awards for Best Real Life feature as well as Writer of the Year runner-up. He is also a past fellow of the International Women’s Media Foundation.

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