International Appraiser: Objective valuation advice on international real estate: Jacob Zuma

Showing posts with label Jacob Zuma. Show all posts

Tuesday, June 12, 2012

South African game farm values: A farm agent responds from the Waterberg

Game ranch in the Waterberg

I had two posts last year about the decline in South African game farm values and openly wondered if farm buyers were scared off by the radical land expropriation rhetoric of Julius Malema, who was then President of the African National Congress Party’s Youth League, but has since been dismissed and disavowed by the ANC Party and President Jacob Zuma. Malema specifically said:

“They (whites) have turned our land into game farms…We must take the land without paying. They took our land without paying. Once we agree they stole our land, we can agree they are criminals and must be treated as such.”

Farm agent Marius Willemse, who is active in the Waterberg Province which I visited, has this to say:

"As I’m not a wannabe politician, I won’t dwell on the political utterances. The words do not reflect ruling party or government policy. The rule of law prevails in South Africa. It is therefore unfortunate that once said such statements can not be undone.

I’m also not an economist or sworn valuator; I’m a farm agent servicing the Waterberg and believe game farm prices are influenced by many more factors. No single factor ever full explains a market’s performance.

Property prices in South Africa are currently still depressed as in many other parts of the World. It is partly a reflection of the money and capital markets and a result of the global economic fall out.

Many of the Buffet, Branson and sheik types of this World are currently off fighting other battles and not investing in what in a lot of instances is recreational property.

This lower level of foreign investment has a knock on effect. Local farm owners aren’t able to sell and then immediately reinvest the proceeds in another property, driving prices higher.

Current pricing also expresses normal cyclical activity. We’ve had an excellent run with year-on-year farm price growth as high as 47.5 % in the second half of 2008 (FNB National Farm Valuations Index). The market is simply taking a breather and if it is in negative territory then this will also only last a while. Before we know it the cycle will once again repeat itself.

The Waterberg area is special. It is malaria free, scenic and game rich, wild Africa at its best. It is close to the Johannesburg international airport and the heartland of the South African economy. It is easily reachable on a four lane highway and the road to its centre, Vaalwater, is currently being rebuilt.

The area is slowly but surely getting its act together. It is now a UNESCO-recognised biosphere reserve and there is a growing collaborative approach to marketing the area as tourist destination.

I think that as soon as the global economic dust settles we will once again see very significant farm price growth in the Waterberg".

I hope I didn't previously present a false impression of South Africa as seething with racial strife. What I witnessed was quite the opposite. My Afrikaaner hosts seemed proud of the progress, both social and economic, that their nation has made in the last two decades, and never had anything disrespectful to say about black people. While riding the freeways of Pretoria I saw many German luxury cars being driven by young black people, much like Atlanta, suggesting an inclusive economy which allows all races to prosper. The closest thing to a racial conflict I saw was when one of the hosts had an argument with a black meter maid "My taxes pay your salary!"

Vernon Martin, MSRE, CFE

Vernon Martin performs due diligence and appraisals on commercial and residential real estate throughout the world. He has 40 years of commercial appraisal experience and has physically appraised properties in more than 20 countries, 44 U.S. states, and 5 Canadian provinces. He started his career at the global firm Jones Lang Wootton and went on to become the chief commercial appraiser at 3 national (U.S.) lending institutions, formerly taught Real Estate Valuation at California State University, Los Angeles and has authored many professional journal articles and two books. He has degrees from the University of Chicago and Southern Methodist University and is a Certified General Appraiser and a Certified Fraud Examiner. He also appraises specialty properties such as solar farms, wind farms, cannabis-related real estate, golf courses and ski resorts. If you have a particularly difficult property needing a valuation, send your inquiry to Mr. Martin and he may be able to help. For more information, call 1-323-788-1605, or e-mail him at vernonmartin@aol.com .

Sunday, November 13, 2011

South African update: Will the ouster of Malema stop the decline in farm values?

In my last report on South Africa, I mentioned two possible factors in the price decline for South African game farms. One factor was the overall world surplus of vacation properties for the super-rich, and the second factor was political rhetoric calling for uncompensated government expropriation of white-owned land, rhetoric amplified by a rising star in South African politics, Julius Malema, the ANC’s Youth League President. Last Thursday, Malema was removed from his position and suspended from ANC for five years for bringing disrepute to the party, because of his divisive speeches within South Africa as well as his interference in the politics of neighboring countries. He has been constantly opposed by President Jacob Zuma.

The removal of Malema may help restore investor confidence, although the Johannesburg Stock Exchange All Shares Index was up by less than one percent after his sacking. The JSE AS index was hit hard earlier this week by a sovereign ratings downgrade from Moody’s.

Expropriation of white-owned properties

Confiscation of white-owned properties occurred during the 1990s in nearby Zimbabwe (formerly known as Rhodesia) and has resulted in a decline in agricultural productivity there and an overall implosion of the economy after a period of hyperinflation.

At end of the Apartheid Period of South Africa in the 1990s, 87% of commercial farmland was white-owned, and the new ANC-led government pledged a compensated program of land redistribution that would transfer 30% of white-owned land to blacks. Progress has been slow, and whites still own 84% of commercial farmland.

It is difficult to calculate the effect of the removal of Malema in restoring real estate market confidence. The ANC Youth League which he presided over still insists, after his ouster, on the nationalization of mines, a similar issue, and this matter is still being actively studied by the African National Congress despite the insistence of national leaders that it would never happen.

One problem also besetting the agricultural sector is the reportedly high murder rate of white farmers, most who are allegedly killed during ordinary robberies rather than politically motivated violence. More than 3000 farmers are alleged to have been murdered so far, a very alarming number, and Malema's removal will have little effect in stopping this trend.