08 May 2020
The Minister of Cooperative Governance and Traditional Affairs, the Honourable Dr Nkosazana Dlamini-Zuma
The Minister of Trade and Industry, the Honourable Mr Ebrahim Patel
The Minister of Human Settlements, the Honourable Ms Lindiwe Sisulu
Dear Minister Dlamini-Zuma, Minister Patel and Minister Sisulu
COVID-19 RISK-ADJUSTED STRATEGY: ESTATE AGENTS
Real Estate Business Owners of South Africa (“REBOSA”) is an independent, non-profit company (NPC), representing the best interests of business owners and principals of small, medium and large estate agencies operating in the residential real estate sector. Our members collectively employ more than 15 000 registered, practicing estate agents.
The views expressed in this submission are supported by Rebosa members.
Further to the previous submission made by ourselves to Minister Dlamini-Zuma in relation to the draft sectoral framework pursuant to which the Level 4 regulations were published, we commissioned the Urban Real Estate Research Unit of the University of Cape Town to carry out an assessment of the size and characteristics of the South African residential real estate sector and the implications arising for that sector out of the COVID-19 lockdown. It is our honour to attach a copy of that report.
From that report you will note that, amongst other things, the residential real estate sector from a gross value-added perspective is responsible for some 6% of total South African GDP and employs upwards of 100,000 estate agents, support staff and rental administrators. That report makes the point also that it is anticipated that there may be a decline of up to 45% in the number of real estate transactions during 2020 as a result of the COVID-19 lockdown and that up to 86% of estate agents indicate that they may not be able to reopen business if the lockdown continues in respect of them for a further month.
Almost no transactions were concluded over the past six weeks
A further observation which arises out of the report and which is apparent to people involved in the residential real estate sector is that the estate agents are a key part of the value chain which enables the entire sector to operate, a point we touch upon again further along.
In support of a submission that estate agents should be permitted to operate under Level 4, we wish to make the following points:
- Estate agents in South Africa hold professional qualifications and are widely recognised as professionals, including by the South African Revenue Services. In principle therefore estate agents would form part of the Level 4 professional services which are permitted to operate in support of the other Level 4 services. The exclusion of estate agents from this category is anomalous and without foundation
- Estate agents in South Africa require far less direct physical interaction with members of the public than has ever been the case in the past and indeed, such interactions are in fact quite minimal. The South African residential real estate industry is of a world-class standard and has led the use of electronic information portals in the sales of properties. In current times, most property sales originate through the display of information online through property portals and video footage which provide prospective purchasers with “virtual walk-throughs” of the properties available for purchase. This is not only a highly efficient way of doing business but also has the effect that it reduces, to a very significant degree, the need for direct physical interactions between estate agents and members of the public. The result is that properties are very often only viewed “by special appointment” made by a prospective purchaser who has identified online which property or specific properties may be of interest. This to a very great degree reduces interactions between people, which in turn would significantly ameliorate the risk of COVID-19 transmission, bearing in mind that social distancing, the use of masks and the other usual hygiene rules will still be applied in context. It should be borne in mind too that special rules can be created for the real estate sector in terms of the number of people that may at any one time be present to view a property. We would in any event expect, in the current circumstances, that such viewings would be “by appointment only” so that there would never be more than a very small number of people simultaneously present at any premises.
- As is apparent also from the report attached here, the real estate sector in South Africa effectively constitutes a “value chain” of interrelated elements and actors which together enable property -related transactions to occur. These include financial institutions, conveyancers, mortgage originators and estate agents, to name just a few. A review of the Level 4 activities permitted under the current lockdown regulations reveals that by far and away the greater part of that value chain, other than for estate agents, is currently able to operate. Yet, it will be appreciated that the role of estate agents is central to enabling the rest of the value chain to operate; if estate agents are not able to operate, then much of the rest of the value chain is effectively rendered inert, sterilising a significant part of South African economic activity. By permitting estate agents to operate, government will be effectively “reactivating” the entire value chain but without in any way materially increasing the risk of COVID-19 transmission.
- The directive published on the 7th of May relating to the movement of persons to different places of residence in consequence of lease agreements entered into before or during the lockdown period, in order to be properly implemented requires that estate agents be able to carry out certain activities. Estate agents are required to carry out certain statutory inspections of premises (see for example the Rental Housing Act, 1999) before tenants take occupation of a property in order to ensure that there can be correctly identified those damages for which the tenant should or should not be liable; furthermore, estate agents are required to take water and electrical meter readings in order to manage matters not only during the term of the lease but at the beginning and end of lease periods. It will be appreciated that all the foregoing has a relationship to lease deposits paid by tenants which are held; deposits cannot be released before the necessary inspections have been made, which may well also prejudice tenants (especially at a time when funds are very restricted for many people). Further, some properties may have stood empty for protracted periods of time before new tenants are about to move in; as a matter of practicality it is necessary for the agents to be able to inspect such properties and arrange for any repairs that are necessary, before the tenants take occupation. It is clear therefore that in the absence of estate agents being able to operate under Level 4, the effective implementation of the directive of 7th May will be impeded.
In the circumstances, there would appear to be very sound reason for permitting estate agents to commence operations (even if on a basis which has certain associated restrictions in order to ensure that transmission of COVID-19 is limited) as soon as possible under Level 4.
In closing, we make the point that we have deliberately kept this submission concise as we are aware of the likely volume of information that government representatives are trying to deal with in the current context. Nevertheless, we would be more than willing to provide such further assistance, input and engagement as government may see fit of us in order to assist in the current context.
Jan le Roux