The jobs of over 50 000 people could be saved and the government would receive much needed revenue if the Deeds Office and municipalities could operate on skeleton staff during the COVID-19 lockdown so that the sales of property can continue.
This is the appeal the broader local property industry made to Minister Ebrahim Patel of the Department of Trade and Industry last week Wednesday 1 April. The appeal was co-signed by the South African Property Owners Association (SAPOA), the National Property Forum (NPF), Real Estate Business Owners of SA (REBOSA), the National Association of Managing Agents (NAMA), the SA Institute of Black Property Practitioners (SAIBPP), the Institute of Certified Business Brokers (ICBB), SA Institute of Auctioneers (SAIA), the Institute of Estate Agents of SA (IEASA) and the SA Business Broking Association (SABBA).
While in agreement with the necessity for the lockdown to curb the spread of the deadly and highly contagious coronavirus, leaders from the property sector believe it is possible to find measures, sensitive to the current situation and ensuring people’s safety, that would make it possible for property sales to continue – as has already happened elsewhere in the world.
Tholo Makhaola, president of the South African Institute of Black Property Practitioners (SAIBPP), says the national lockdown has placed at risk the livelihoods of around 50 000 commission-based property practitioners who operate in the real estate sector. He fears the impact will be worst felt by struggling black agents and QSE (qualifying small enterprises) agencies.
“While we support the urgent interventions instituted by the government to curb the spread of the COVID-19 pandemic by instituting the national lockdown, we also recognise that this may have the unfortunate result of crippling the industry and jeopardising the livelihoods of the thousands of real estate practitioners and commission earners in the sector.
“We therefore support calls made by industry to declare the Deeds Office an essential service and also invoke the Deeds Registration Act to fast-track the existing backlog of property registrations. Municipalities should also make use of digital platforms to fast-track the processing of clearance certificates which will go a long way to solving some of the already frustrating administrative hurdles faced by practitioners and consumers alike in the sector,” says Makhaola.
In the United States many states have declared real estate services to be an essential service as long as strict safety guidelines are followed. For instance, in California this means continuing with virtual show houses as hosting an open house is still off bounds, but an agent may accompany a serious buyer with one other person to a property they are interested in on condition that the agent wears gloves and disinfects any surfaces that are touched, etc.
Property sales could save thousands of jobs and release millions in revenue to government
Dr Andrew Golding, chief executive of the Pam Golding Property group says it is well-documented that the property sector, together with finance and business services, are the second biggest contributor to overall GDP growth in 2019. “The freezing of the industry means that government is precluded from receiving much-needed revenue into its coffers from transfer duty – a significant contributor to SARS – payable from transactions already being processed,” he says.
Secondly, the lockdown on property sales severely impacts the income of thousands of all property professionals. Carl Coetzee, BetterBond CEO, points out that in a typical month in South Africa between 10 000 and 12 000 property transactions are concluded. “It’s a process that affects various parties and sectors, including banks, bond originators, estate agents, attorneys and more,” he says.
“With the Deeds Office closed, thousands of transactions are placed on hold, which effectively means a loss of income for thousands more who are directly and indirectly involved in related sectors and services,” explains Coetzee.
As mentioned in the real estate sector alone, it is estimated that lack of property sales may put the jobs of thousands of estate agents at risk as they are entirely commission-based and are now without an income. Bruce Swain, CEO Leapfrog, explains that even though many agents are working remotely and trying to continue with business-as-usual as far as possible, they can’t conclude property sales with the Deeds Office closed.
“The pipeline blockage at the Deeds Office means that agents cannot be paid, because the property transactions that they have been working on for months cannot be registered at the Deeds Office,” says Swain.
Due to the backlog at the Deeds Office, it could take months for registrations to be finalised. These agents will not be eligible for UIF payouts and this means that many agents won’t be able to earn an income for months after the end of the lockdown, adds Makhaola.
It is rumoured in the press that government may consider extending the lockdown up to July or even August. Tony Clarke, CEO Rawson, says should that happen the risk of many estate agencies closing down permanently is very real and he also fears that many persons from previously disadvantaged backgrounds will then have no choice but to leave the real estate industry.Samuel Seeff, chairman of the Seeff Property Group, confirms that the industry is experiencing a significant cash squeeze due to the closure of the Deeds Office and local municipalities during the lockdown which means many agents cannot receive commissions for finalised sales. This has created a major problem for the industry as a whole.
The closure of the Deeds Office has also left buyers and sellers high and dry that were in the process of concluding a sale of property – a situation that could add to the financial distress of sellers who are in desperate need of the proceeds from the sale points out MC du Toit, CEO of digital property market place, BidX1 South Africa.
“For most people, the purchase or sale of a property will be one of the most significant transactions of their lives, and in the current market, many sellers have sold their most valuable asset out of necessity. With the Deeds Office being closed, I am concerned that many sellers will find themselves in extremely difficult circumstances,” says Du Toit.
Run Deeds Office and municipalities on skeleton staff
One of the ways that the government could mitigate the devastating economic impact of the situation is by listing the Deeds Office as an essential service, as was done for banks and other financial institutions. Jan le Roux, CE of Rebosa, says the office could be run with a skeleton staff as long as this will allow for properties already in the pipeline to be registered which will alleviate the severe backlogs experienced by many deeds offices in the country.
Secondly, adds Le Roux, the property industry would also like to see that a skeleton staff be employed at local municipalities so that rates clearance certificates for the sale of properties may be processed.
“Yes, it would help the real estate industry if the Deeds Office was open so that those transfers which were ready to be lodged prior to lockdown could be effected. It would also help home sellers, the banks and the transferring attorneys, and release a considerable amount of money into the economy,” says Berry Everitt, CEO of Chas Everitt International property group.
The property sector would also like to see that real estate services be listed as an essential service. Clarke points out that the government allowed banks to continue to ensure the flow of money and consideration should also be given to estate agents. “Many sellers will reach the point of financial distress and will have to offload their properties – they will be left stranded if real estate cannot operate,” he says.
Rawson points out that it is already possible for estate agents to do most of their business online through virtual viewings, virtual valuations and virtual showhouses. As was done in the US, local government could list estate agency services as an essential service subject to adherence to safety and hygienic guidelines such as that estate agents must wear masks and gloves, all touched surfaces should be wiped down, limiting the number of persons to visit a property for sale etc.
Looking ahead, Paul Stevens, CEO of Just Property, says what also needs to happen is the modernising of our country’s deeds registrations systems and processes and this crisis may just be the catalyst needed to see change happen. He would like to see government look at ways to future-proof the operations of the Deeds Office such as for example speeding up the use of cloud-based technologies like blockchain.
The lockdown can also be the catalyst for change in the real estate industry. It can certainly be said that the coronavirus crisis has brought into sharp focus the vulnerability of agencies that rely on conducting real estate services in the traditional manner. “Technology has never been more important for our industry. The challenges that we are facing are unprecedented, but they also raise questions about the viability of traditional processes in an increasingly digital world. Digitisation of the transfer process would allow us to adapt to more agile and secure ways of working, and protect sellers and other stakeholders from limbo where many now find themselves,” ends Du Toit.
Editor’s note: At the time of publishing this article the Minister’s office had acknowledged the appeal but had yet to comment on the proposals made by the property industry.
– Property Professional on 9 April 2020