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#ExpertsTalk: What the housing market needs for real growth

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Neville Berkowitz, property veteran and founder of low commission estate agency HomeBid, speaks to us about the trends he is currently seeing and what he believes is needed to resuscitate a flat national housing market.

Q

Do you think we will ever return to a housing market when demand exceeds supply and home prices return to 10% p.a. growth?

A

Those of us who have been around since the early 1970’s have endured a roller coaster ride as illustrated in the graph of business confidence which mirrors the country’s economic performance and residential property market’s performance as well. We have experienced both boom and bust periods in the housing market and confidence, or lack of confidence, is the major factor driving home price movements.

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Q

Wouldn’t interest rates be a major factor too?

A

After the 1976 Soweto Riots interest rates were low but confidence was at an all-time low and the housing market was in free fall as demand fell away and emigration boomed. The ideal situation is to have low interest rates and strong confidence. This usually happens when the economy begins its upswing phase but doesn’t last more than a few months as the demand for funds begins to drive up interest rates.

Q

What needs to happen for us to see the kind of growth the economy, and housing market, needs?

A

Currently in South Africa, there is a crisis in confidence brought about by a lack of faith in our country’s president, the so-called state capture by foreign nationals, bribery and corruption allegations at many levels of government, and so on. If we could solve these issues by appointing a person of high repute to run the country, rid the country of the architects behind the so-called state capture, and punish those benefitting from the bribery and corruption at all levels of government, we will see a major turnaround from local and foreign investors willing to invest in South Africa. This should create new job opportunities and stimulating the economy to achieve its potential of 5% p.a. growth. The housing market will react positively and previous home price levels of 10% p.a. will become achievable.


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Q

Where will the money come from to inject such confidence into the economy?

A

It may surprise you to learn that according to the SA Reserve Bank Bulletin Q2 2017, corporate South Africa has over R1,750bn sitting in South African banks awaiting the correct time to invest these funds for their shareholders. To put that number into perspective, the average home in South Africa is sold for around R1,1m.The savings of corporate South Africa could finance, in cash, some 1,6 million new homes at R1,1m per home. So the problem isn’t the money, it’s the lack of confidence to invest these savings into the economy.

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ungerermariette@gmail.com

Mariette Steynberg is a qualified economist with a post-graduate diploma in financial planning. She has enjoyed working on holistic financial plans for clients in various stages of life, as well as a development economist assessing the socioeconomic impacts of new developments. When she is not working, Mariette enjoys parenting her quirky, delightful toddler girl. Cloth diapering, Eskimo kisses and the importance of reading to your child are all causes close to her heart. Mariette is passionate about financial education and hopes to use the experience she has gained to share knowledge with HomeTimes’ readership. Her goal is to provide information that is implementable by everyone.

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