It's been just more than two years since International Housing Solutions (IHS) established its SA operations in Johannesburg - and the company remains passionate and excited by the opportunities offered by this country.
IHS MD Soula Proxenos admits that the company is frequently asked: "Why SA?" But for her, the answers are clear. "We have enormous confidence in SA," she says. "We believe that this country stands out as an extremely significant emerging market; it unquestionably offers the same or better potential as the BRIC (Brazil, Russia, India and China) countries. I often joke that it should be the BRICS countries - the 'S' standing for SA," she quips.
"We believe that this country stands out as an extremely significant emerging market" - SOULA PROXENOS
Proxenos' confidence is borne out by hard facts: rated against the BRIC countries in a number of important economic categories, SA comes first or second; on global competitiveness ranking, it rates only behind India; on the real estate transparency index, its second-tier ranking places it far ahead of several other emerging markets, most significantly a fourth-tier China.
Moreover, the country has earned itself a noteworthy sovereign rating of BBB+ from Standard & Poor's, indicating its stability and outlook. Of the BRIC countries, only China has a better sovereign rating than SA.
Says Proxenos: "The legislative framework is in place for business to proceed smoothly here, especially in the housing industry." She refers specifically to the rule of law in SA, as well as its excellent title and registry system, which is the backbone of collateralised lending, and further commends the country's legal framework for foreclosure.
WHAT IT MEANS
 SA's potential an attraction
Growth of property sector an added bonus
|
The growth of SA's property industry is an additional highlight. Despite coming off a low base, the industry has proved itself one to watch.
Moreover, prospects for growth in other areas of the economy continue to look good, despite the global downturn. Proxenos points out that as long as China's economic engine continues to fire, there will be a demand for SA commodities.
But there are other factors, too, which encouraged IHS to enter the local market two years ago. Among these were the international investment interest that continues to be displayed in the country, as well as the fact that 14 years of democracy attest to political stability. "We had examined opportunities around the world, and SA undoubtedly presented the most exciting potential," she says.
Adding to that potential are several conditions all culminating to create great scope in the mid-income housing market. Government is addressing housing shortages in the very low income market, and there's no shortage of options for high-end home buyers.
But that left a significant gap in the middle market - and yet, the disparity between enormous demand and low supply remained intact.
Says SA country director Elize Stroebel: "Private market developers have cornered the top income tiers, while government is attempting to provide fully subsidised units for the poor. However, no-one has considered the needs of the missing middle' - the 3,7m households that can afford a house between R130 000 and R500 000."
The households in this band cannot afford the luxury offerings of high-end residential housing, nor do they qualify for subsidies. And yet, if anything, this market segment is set to grow with the effect of changing market dynamics. "Simply put, South Africans will require literally hundreds of thousands of affordable housing units near urban employment sites, and this demand is unlikely to diminish any time soon," Stroebel says.
Not even in the face of softening markets? "Especially under present market conditions," she says. She points out that the economic downturn, perversely, works in favour of mid-income households in search of housing. "As with any other commodity, the greater the demand, the higher the price," she says. "Just 10 months ago, the industry was dominated by developers all seeking the same land, while banks were all targeting the same developers. This, inevitably, drove land prices ever higher."
That's before the land was serviced and top structures built, with the result that R960 000 was considered an average house price - well beyond the reach of the midrange buyer. "Though the market's turn has proved painful for many, it has brought down the premium paid for land - which means that low or mid-income households are faced with more options and opportunities.
"All told, we feel our confidence in SA has been handsomely repaid, and we're more pleased than ever by the country's prospects," says Proxenos.
"We have raised more than US$220m, from foreign and domestic investors, for the recently launched SA Workforce Housing Fund. These investors share our enthusiasm for the prospects of SA and the financial rewards that are possible for servicing the low and moderate residential market."
