First National Bank economist John Loos says getting South Africa’s construction industry and residential and commercial property markets out of the doldrums requires a holistic approach, including private sector participation and a willingness by Government to change policies.
Small interest rates cuts will not have an impact, says Loos. It is about the bigger macro environment and getting general economic management right.
Speaking at the inaugural Residential Investment and Development Conference in Sandton, Johannesburg, Loos urged businesses to engage with Government at a high level to address the stagnation of the economy and the property market. While housing budgets are being “crowded out” by issues like bailing out Eskom, South African Airways and the Post Office, and South Africa’s fiscal situation is getting worse, it was wishful thinking that Government could provide some sort of stimulus to construction or housing, Loos stated. He asserted, however, that with a government that is now open to changing its policies, and a well-developed, capable, well-diversified private sector ready deliver goods and services, there was hope.
“Our private sector is already responding swiftly to putting in electricity solutions as fast as it is allowed to. The Government needs to accelerate this and enable the private sector to deliver other goods and services. Government’s role must be that of the regulator. The private sector needs to impress upon Government what changes must take place and work with them to ensure that they happen.”
Loos also told Residential Investment and Development Conference delegates that densification is critical to address South Africa’s housing backlog, particularly as land becomes scarcer, which is already a challenge in the Western Cape. He recommended that the abundance of office space should be repurposed for residential use and stressed that improved urban planning is crucial. “Apartheid-era large dormitory towns are resulting in high transport costs for the poor. To reduce the costs of property, we must reduce transport costs,” Loos said. He believes that the solution lies in strategic zoning and densification along road transport corridors, including bus routes. Demand for public transport would be created along high-density corridors and this would lead to a more viable public transport system. South Africans spending less on transport may have more to spend on property.