Real Estate Investor Magazine South Africa August 2013 | Page 20

NEWS ALERTS

BY MONIQUE TERRAZAS

In Property News This Month
The Good

The Bad

The Ugly

SA House Price Growth Ranks
3rd Globally

The New Expropriation Bill

Construction Sector Collusion

According to a recent analysis in The Economist,
South Africa now ranks in third place in terms
of global house price growth, with 11.1% yearon-year growth over the last 12 months and 18%
growth since the fourth quarter of 2007. South
Africa’s year-on-year growth performance is
exceeded only by Hong Kong with 24.5% and
Brazil with 12.8%. In terms of growth since
the fourth quarter of 2007, South Africa’s
performance is on par with that of Canada
(18.3%), and is exceeded only by Hong Kong
(109.4%); India (88.8%); Singapore (24.8%);
and China (20.4%).

The Expropriation Bill of 2013 is better
than its 2008 predecessor, in allowing the
courts, rather than the state, to decide the
compensation payable for expropriated
property. However, according to Dr Anthea
Jeffery, Head of Special Research, South
African Institute of Race Relations (SAIRR),
in practice this improvement is likely to
be negated by other aspects of the Bill, in
particular, that it allows hundreds of organs
of state to take ownership and possession of
property by simply giving notice to the owner,
before the state has shown that all relevant
constitutional requirements have been met
and before any compensation has been paid.
In addition, it fails to recognise that, where
expropriated property includes a person’s
home, any eviction requires the express
authority of the courts. Hence, the option of
applying to court to decide a different measure
of compensation is likely to benefit only those
with deep pockets, who, despite the loss of
their property to the state, can afford lengthy
litigation with no guarantee of success. As
such, the Bill undermines the right of access
to court.

The Competition Commission has fined 15
major construction firms a combined R1.46
billion for ‘rampant’ collusive tendering in
projects between 2006 and 2011. In a fasttrack disclosure process, the Commission had
applications for settlement from 21 companies,
revealing collusion at meetings to inflate the
price of tenders and to allocate contracts among
themselves, or anticompetitive behaviour
relating to more than 300 projects. The total
value of these projects is an estimated R47
billion, R28 billion related to public sector
contracts and R19 billion related to private
sector projects. Three firms which did not accept
the settlement offer - Group 5, Construction
ID and Power Construction - will reportedly be
prosecuted.

The analysis reviewed 18 countries of which 12
have experienced growth in prices, including
Britain, with a 0.9% year-on-year increase and
the US, where house prices are up by 9.3% yearon-year. The six countries that have experienced
negative growth are France, Japan, Ireland,
Italy, the Netherlands and Spain, where prices
are down by 7.7% year-on-year.
To judge whether prices are at sustainable
levels, the analysis also considers the price-torent ratio (analogous to the price-to-earnings
ratio used for equities) and the ratio of prices
to disposable income per person (a measure of
affordability). If these gauges are higher than
their historical averages, property is overvalued;
if they are lower, it is undervalued. In relation
to rents, South Africa’s residential property is
undervalued by 2%, indicating room for further
growth. In relation to incomes, it is overvalued
by 10%, but this still compares favourably to
those of Australia (24%), Canada (32%) and
France (34%), all of which are likely to see big
downward adjustments in the coming year.

18

August 2013 SA Real Estate Investor

While government claims that the Expropriation
Bill is needed to speed up land reform and correct
a great historical injustice, 92% of successful land
claim beneficiaries have opted for cash rather
than the return of their land, as they have no
wish to farm. In addition, between 50% and
90% of land reform projects have failed. By its
own admission, government has spent billions in
taxpayers’ money to take hundreds of fa ???????)??????????????????????????????????????????)????????????????(+?q
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