South Africa needs good Investment Climate
March 11th, 2008
A well-known property economist says if South Africa doesn’t ensure an attractive investment environment from an economic and policy point of view, local investors will increasingly face the choice of whether to invest locally or elsewhere.
Prof Francois Viruly points out that the SA property market works within a local socio political environment which is influenced by international norms. "When international views on environmental regulations change, this influences our regulations and influences the ability of our property market to undertake developments and transactions," he says. He elaborates by explaining that the global zone comprising the environment, the global economy and Real Estate Investment Trusts (REITs) affects the property market. "Then, like layers of an onion comes the constitutional zone, which includes human rights and property rights and needs to be in place for foreign investment. The governance zone includes the macro economy, the environment and land management.
"We are seeing economic growth in many countries because the constitutional level is offering environmental legislation to develop the market. Then comes the operational zone - the players, the property charter, trends, funding and IRR – effectively what makes the property market effective or non-effective," he says. "And finally we see the transactional zone. Environmental issues will come into the transactional zone. "There is a lot of energy in the centre or transactional zone, so we have to ensure that the conditions or circles around the property market are not so onerous that they hamper performance and foreign investment."
In addition, Viruly queries whether we can grow South Africa’s economy. "If we can’t, we need other economies to invest in it," he says. "R410bn must have a positive impact though on many places in SA. Government is going big time into infrastructural expenditure, which crowds out the private sector. In the long term SA will have better infrastructure, which is very positive for the country and its growth." Viruly also queries whether we can carry on growing SA’s listed property sector. "The capitalisation of the listed property sector has grown in leaps and bounds. The question that comes to the fore is whether we can carry on growing it when the exposure of local institutions to direct property is about 3,5% when it should be 10% according to international norms," he says. "I think there will be a strong appetite from local institutional investors for property in years to come, which means that the local market will not be able to provide sufficient investment grade properties. This will result in institutions and other investors looking beyond South Africa’s borders."
SAHomes4Sale - is the leading property portal in South Africa. View our wide selection of property for sale in South Africa, Search for houses, businesses, apartments, smallholdings, farms and flats for sale in South Africa.
Entry Filed under: Home