So reckons Tony Clarke, MD of Rawson Properties – and, he says, the South African property market cannot avoid being affected by this.

“Some investors whom I personally regarded as bold and farsighted are increasingly “freezing” – like deer in a car’s headlights,” he said.  “They simply won’t jump in any direction.  Nevertheless, it remains true as our chairman Bill Rawson was last week reported as saying, that the SA property market has come through the downturn better than many in the west – and that it still by and large provides good growth prospects.”

Clarke said that he supports the Keynesian principle that an upturn in the property industry almost invariably provides the stimulation that a sluggish economy needs.  Governments working for the revivals of fragile economics, he says, should, therefore, do what they can for this sector.

“The thinking of most European and Asian economists today is that legislative and regulatory changes implemented to encourage home ownership and home development should be first steps in any economic stimulation plan.  It is because China adopted this policy wholeheartedly that today they have the highest per capita savings in the world (30% of Chinese earnings are saved) and one of the world’s fastest home building programmes.”

Asked what legislative and regulatory reforms he would like to see in the SA property market, Clarke said that a good initial step would be to reduce the tax payable on rental incomes.  This, he said, would “ignite” the buy-to-let market which in turn would create more rental opportunities and increase competition in the market to help those many South Africans still obliged to rent because they do not qualify for bonds.

Another worthwhile innovation, he said, would be for the banks to be less insistent on obtaining 10 to 20% deposits as a condition of granting a bond. 

“The argument here is that unless a deposit is paid, it is too easy for the borrower to walk away from his commitments.  However, those of us working with aspirant buyers from all income groups can testify that at the lower income levels there are many potential buyers who simply cannot save but can produce glowing employer testimonials, who have held their jobs for years and who have good credit track records.  Previously such people regularly got 100% bonds.  Obviously, the banks have to be very selective in awarding such bonds today but you can take my word for it that they are missing out on wonderful potential clients because their bond criteria are not tailored to the individual but rely on a scorecard system.  Higher deposits do not decrease defaults, they simply help the banks lower their risk.”