Property still race divided

2014-05-18 15:00

There are only a few big players and it is not easy for black people to get in, according to black real estate professional. Mamello Masote reports

Black property developers are on the back foot and transformation is happening way too slowly, according to Tshepo Matlala, the CEO of the SA Institute of Black Property Practitioners.

He said black property developers were not getting enough assistance from government and the Public Works department was failing them.

“To be a property developer, you need a strong balance sheet for funders to fund you and very few black people would have that, and you also need access to reasonably priced land,” said Matlala.

He said private land was expensive and strategically held land by municipalities, and local and provincial government needed to be released to black property developers.

Matlala also said Public Works has stalled on the leasing strategy introduced to the industry in 2006. According to the strategy, the percentage of black ownership determines the length of a government building lease, starting from a 10% ownership being only one year, while 100% black ownership is 10 years.

But after the public works department was rocked by leasing scandals including that involving businessman Roux Shabangu and former police commissioner Bheki Cele, Matlala said the department pulled back.

“When Public Works said they were relooking at the leasing strategy, it brought a lot of uncertainty into the market and some banks even closed down their BEE leasing divisions,” Matlala said.

According to him, there was nothing wrong with the policy, but with its implementation.

The organisation has sent a formal letter to the minister but was still waiting for a response, he said.

“The property listed sector is worth about R240?billion, and the value of Public Works’ properties is R350?billion. They are bigger than the listed sector and I don’t think they realise what a big opportunity this is,” he said.

The leasing strategy has also been responsible for creating four big black property development players: Rebosis, Dipula Fund, Ascension Properties and Delta Fund.

Currently, there is a proposed merger between Rebosis, Ascension and Delta Fund, which, if it goes through will become the largest black-owned property development company in the country with an expected market capitalisation of R9.5?billion.

Matlala declined to comment on the merger.

But property development is not the only area where transformation is lacking – residential real estate is also behind. Matlala said there were only a few big players and it was not easy for black people to get in.

Samuel Seeff, the chairman of Seeff Properties, said while the industry is committed to transformation, the conditions of the industry have changed and opportunities for sales commissions have decreased.

“Sales volumes are still about 30%-40% below that of pre-2007/08 and operating conditions remain tough for estate agents,” said Seeff.

“We have, for example, seen that many previously disadvantaged candidates that were working for us pre-2007/08 have since moved on as a result of the fact that sales were down, thus affecting their income.”

He also said the commission model of real estate agents along with the educational requirements and an internship period means it takes a few months for new entrants to make money, which was a deterrent.

Andrew Golding, the CEO of the Pam Golding Property Group, agreed that market conditions made transformation in the real estate industry a challenge.

“The global economic recession in 2007 dealt the real estate sector a significant blow as far as transformation was concerned. Many estate agents from previously disadvantaged communities were forced to leave the industry given that the South African real estate market, in terms of number of transactions, more than halved at this time,” said Golding.

In terms of actual home ownership among black people, the SA Institute of Race Relations paints an optimistic picture.

“Out of 11?594?000 African homes, 6?622?000, or 57%, were owned and fully paid off. A further 4% of African homes were owned but not yet paid off,” said Kerwin Lebone, a researcher at the institute.

He said 2.3?million of these homes were RDP houses and a further 400?000 old township housing stock transferred by the previous government at a discount

to black African families. “The remaining African households, therefore, include mortgages and other unspecified kinds of tenure,” Lebone said.

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