Big gains ahead for Jo’burg real estate as key Budget reforms unfold

Johannesburg’s real estate market is expected to achieve greater stability and a boost in investor confidence following the key reforms outlined today by Finance Minister Enoch Godongwana in his Medium-Term Budget Policy Statement.

“The city has been working hard to overcome the effect of service delivery failures and infrastructure bottlenecks in the run-up to the G20 Leaders’ Summit later this month, and now stands to benefit even more from the government’s dual focus on private-sector partnerships in infrastructure and the restoration of municipal capability,” says Stephen Whitcombe, MD of leading Johannesburg property group FIRZT Realty.

“A more disciplined macro-economic framework, highlighted by the widely-expected confirmation that SA’s inflation target will immediately be reduced to 3%, sets the stage for lower and more stable interest rates over time.

“This is particularly significant for Johannesburg, which is the epicentre of SA’s economy but where housing affordability is still a concern for millions of potential buyers. As inflation expectations fall, borrowing costs for households and developers should gradually ease and unlock massive pent-up demand in both sectional title and freestanding home markets.”

At the same time, he says, Treasury’s plan to stabilise the national debt at under 78% percent of GDP by the end of this financial year while also growing the national revenue surplus by almost R20bn will reinforce investor confidence and reduce the “risk premium” on SA assets, including real estate.

“For Johannesburg, this translates into much improved long-term funding prospects for both public and private infrastructure – and the city’s crucial growth corridor, industrial node and urban regeneration projects. Developers and corporate tenants are likely to experience and appreciate a much more predictable investment environment as fiscal credibility strengthens.”

Of equal importance, says Whitcombe, is the sharpened focus on improving municipal performance and enabling private-sector participation in local infrastructure. “The Treasury’s pilot utility reform programme, aimed at professionalising water and electricity management through partnerships with accredited agencies, should soon have tangible impacts in the city’s northern and eastern regions, where service reliability has undoubtedly affected property values in recent years.

“In parallel, the re-allocation of R19,3bn towards trading services reform in the country’s metros, including Johannesburg, as well as tighter credit control and cost-reflective tariffs will enhance the financial health of city utilities and reduce the incidence of billing disputes that have long frustrated property owners and investors.”

Turning to prospects for Johannesburg’s commercial and industrial markets, he says the revival of vital freight and logistics corridors, coupled with the reforms that are currently opening rail and port operations to private operators, promise better connectivity and lower costs of doing business, especially for companies involved with the import or export of goods through a coastal port or in developing cross-border trade with neighbouring States.

“As Transnet’s freight and port efficiency continues to improve, property demand in logistics hubs such as City Deep, Midrand and the East Rand is likely to strengthen, with ripple effects on employment and residential demand in those areas.”

Meanwhile, the firm redirection of government expenditure toward infrastructure expansion rather than consumption adds another layer of opportunity,” says Whitcombe.

“With a new infrastructure bond and a dedicated implementation agency to be operational by 2026, Johannesburg could soon be attracting attract fresh waves of investment into mixed-use precincts, affordable housing and urban renewal projects, particularly in areas aligning with the city’s smart and green growth agenda.

“In the medium term, a better-aligned inflation framework, restored fiscal credibility and targeted improvements in municipal capability are vital steps towards a more sustainable and inclusive real estate future for the city that is key to SA achieving greater economic growth and job creation.”

Issued by FIRZT Realty

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Stephen Whitcombe on

082 412 2949

Or visit www.firzt.co.za

About FIRZT Realty 

Established in 2003, FIRZT Realty initially focused on residential real estate, but has since expanded to offer a broad range of services in both the residential and commercial property sectors, including sales, rentals, auctions and property management.