What impact are ongoing electricity black-outs likely
to have on the property market?

In response to the above question Monté Jordaan, MD of Multi-Projects, an investment property marketing company based in Somerset West, says: “We do not know how great the impact on the economic growth of South Africa is going to be. Only time will tell on that score. But we do believe that the energy crisis will have an effect on property developments - and developers who do not plan for alternative energy sources will suffer.

“Developers and developments that incorporate alternative energy sources to Eskom-produced power will flourish. Developments with generators and alternative ‘green’ sources of power (such as solar panels) will be in high demand. Security that runs off solar panels or stand-by generators will also increase in desirability and value, since power-cuts increase security risks. The smarter developers that apply creative thinking will survive and prosper. Developers are committed capitalists - and they will find solutions!

“ However, as indicated by Eskom, all the indications seem to be that power cuts are likely to accelerate until well into the future – and major power stations require about 5 years or longer to construct. This could mean fewer developments taking place, or lead to them being postponed for several years. This in turn will result in less stock being available, especially residential units. John Loos of FNB believes that the demand for residential property in the affordable market of up to R800,000 will increase. This increased demand will lead to increased prices in this category - while a shortage will drive the prices up further. We further believe that landowners that want to dispose of their land for development purposes (especially unzoned land) will see a dramatic reduction in their expected values, due to the economy cooling down, the increased development cycle, and the increases in holding costs for developers. These costs cannot just be passed on to the consumer; the consumer market is currently very price- sensitive.”

Jordaan says he believes that the interest cycle is very close to its peak, and that we could see reductions in the first half of 2009. “Taking all of the above into account, one must always remember that investing in property is a long-term journey and not a quick one; investors must remain calm and focus on the longer term. The South African property market is still exhibiting the characteristics of a normal market, it is just ‘taking a breather’ from a 5-year growth period. I am sure that it will continue its positive run in and from 2009 to 2012/2014. For those who want to invest in property, now is the right time to buy - especially in new developments that will only be completed in 2010 or thereafter.

“ People must not make hasty, irrational decisions and sell their properties without considering all the options; they might just find out down the line that they cannot replace what they had. Property remains the cornerstone of wealth creation for the majority of South Africans, and will continue to be so for decades to come. I strongly believe in the South African property market and its future. In terms of the power shortages, we must just all remain calm and find a common solution – after all, this power shortage is just a symptom of a growing economy!”.

Contact Monté Jordaan of Multi-Projects:
Cell: +27(0)72 952 2667
Office: +27 (0)21 850 9620
E-mail: info@multiprojects.com
Website: www.multiprojects.com