Summit paves the way for finding solutions to property ownership
Last week the inaugural Real Estate Industry Summit was held at the Sandton Convention Centre. I was asked to share some of my thoughts on property ownership in Africa.
I was asked to participate in the summit because of my prior position on the Community Reinvestment Regulatory Agency Working Group established during the Clinton administration.
Our charge was to revise the rules governing the quality and quantum of investments by banks in low- and moderate-income communities. The reason for that emphasis was pretty straight forward: in a capitalist economy you can’t succeed without access to capital. By definition, low- and moderate-income communities are defined as such because they don’t have access to capital. As a result of the rule changes, more than $2-trillion in credit and capital was directed to marginalised communities to increase funding for small businesses and mortgages.
In addition to my experiences in the US, I’ve been an active investor in Africa for more than a decade, and among the investments I’ve considered are those in real estate.
I was impressed with the summit. It was not your usual “talk shop” or industry trade show. There were several things I found striking. Beyond the more than 1,000 people who attended the multiple forums and the several thousands of people who viewed the exhibits, the diversity of industry actors made this different.
Everybody who is anybody in the industry was there. Banking groups such as Absa, traditional real-estate firms such as Pam Golding and Remax, as well as online broker firms such as Private Property (the summit sponsor), were all present. Likewise, in attendance, were public-sector leaders who manage the regulatory environment in which the industry operates.
Why was this sort of broad-based participation by industry players important? That industry actors came together in such an unprecedented fashion was an acknowledgment that they play a prominent role in the SA economy and have the power and responsibility to further democratise this space.
Housing is a central feature in the economic architecture of the country, affecting everything from construction to manufacturing, to the purchase of goods and services, to capital formation and finance. Given its central role in the economy, home ownership, property ownership and security of tenure are keys to the continued transformation of the SA economy.
Real estate isn’t a sexy subject (or issue), but it is the first step towards economic security and wealth creation. Making property ownership more accessible could transform the economy and close the wealth gap that exists between blacks and whites. Making home ownership more affordable would go a long way in transforming the discussion around land reform.
There were a number of important things that were suggested at the summit that would help further democratise real estate holdings in SA. One fairly easy thing to do was recommended by former president Kgalema Motlanthe, who, in 2015, headed a high-level government panel focused on ways to further fundamental change in the country.
He noted that a significant number of urban dwellers occupy land to which they don’t have title. With title, the folks who occupy such properties would then have the possibility of monetising those assets for their benefit. The remedy to this situation is simple: give them title deeds. This is something that could, literally, be done with the stroke of a pen.
Another thing that could have a substantial effect on expanding property ownership opportunities was one I raised during my presentation. One of the keys to creating greater home ownership opportunities is to make more mortgage money available across more income classes. While SA has one of the more mature and robust mortgage markets in Africa, it is principally funded by long-term deposits held by financial institutions. The net effect is that the amount of money available for mortgage lending is determined by the amount of those deposits, and is further limited by the extent to which other sectors compete for those funds.
One of the things that would significantly boost the amount of money available to potential homeowners is the creation of a secondary market. Creating a mechanism that would allow banks to access long-term financing for home loans would increase the supply of funds available for mortgage lending. With an increase in the pool of capital, interest rates should drop. With more money available at a cheaper price, home ownership will be available to a lot more people.
A third thing that can be done to expand home ownership to those out of the market is to build on what the summit has begun. Without a doubt, it would be an oversimplification to suggest that land reform, restitution and redistribution of land can be done by simply reforming the real estate sector.
Having said that, it would be safe to say that without input from the multiple players in the real-estate industry, the challenges the country faces relative to land reform can’t be overcome. The summit represented an excellent effort to bring all of the critical players to the table. If industry leaders and political leaders commit and continue to do all they can to put home and property ownership within reach for all, they can make a difference.
This means gatherings like this summit can’t be a one-time conversation or one-off get together. The current maldistribution that defines the property space in SA didn’t get this way overnight, which means it can’t be rectified overnight. If this combination of actors continues to come together, the demographics that define this space can become more reflective of the demographics of the country as a whole.
What this means is that while this real-estate industry summit was the first, SA can’t afford for it to be the last, if more South Africans are to become, literal, stakeholders in their country.
• Stith served as the US envoy to Tanzania during the Clinton administration and is the board chair of the Johannesburg-based African Presidential Leadership Centre.