Pulling in the reigns

Harsh global economic climates have hit the South African property market hard and many in the bond origination industry have had to consolidate in order to survive.

Consolidation does have its benefits however, as the industry will emerge from this period healthier and more robust. There are cost-reducing benefits as businesses pool their resources and split overheads. Industry knowledge and experience is also shared, which is a determining factor for the longevity of the business and the progression of the industry.

The property industry has the same patterns as many others; the ebb and flow of growth is normally followed by a period of consolidation. Focus is currently shifting from entrepreneurship and growing the business to looking internally at how the business can strengthen its position in the current market by streamlining its operations. Diversification and strengthening a business's position now will enable it to weather the current economic storm and expand when opportunity emerges in the market once again.

Peter Hewett, CEO of Independent Initiatives, the P A Group's business-to-business value proposition company for aggregators says: "It is common for industries to experience these shifts, especially industries that have emerged in more recent times. The bond origination industry is only about 10 years old and has enjoyed vast expansion over the past few years. Origination is a volume-based business and with current property sales slowing, the downturn in the market has forced those in the property industry to step back and assess the options available to them. Some bond origination companies have merged to bolster themselves and secure volumes of business. This has also provided them with a critical mass component, which has resulted in increased bargaining power.

"Despite the current economic situation, property will always remain an important asset class as it has performed particularly well in comparison to other asset classes in the past. It is important to remain optimistic as, with every investment, one always has to consider the long term return," he adds. "More recently there have been global interest rate reductions and there may be reprieve for the consumer at the next Monetary Policy Committee meeting in December. By all accounts 2009 looks like it will present a different picture both politically and economically for South Africans in the build-up to the 2010 World Cup," Hewett concludes.

Article by: www.iinitiatives.co.za