Most gains still coming
In some ways the 2010 Football World Cup proved to be a disappointment, but that was perhaps more confined to those who had unrealistic expectations of what it would bring and the time frames within which such benefits would materialise.
There were reports of disappointing tourism bookings prior to the competition and stories of those charging exorbitant prices, be it for property rentals or other accommodation not always receiving the flow of foreign bookings that they had expected.
So, perhaps in many instances, those who had expected foreign football visitors to significantly boost the local rental or home buying market during the Cup may feel somewhat let down.
It may well have "normalised" the flows of that small group of foreign buyers, who seemingly declined in number in the second quarter following some very negative political events around the time of the murder of Eugene Terreblanche. But foreigners are by far not a key driver of SAs residential property market as a whole, so the direct short term impact on property was probably insignificant.
We had never really expected the World Cup to have major short term direct impacts on the property market, and therefore are not surprised. To the contrary, it may even be possible that the World Cup had a very short term negative impact on local residential property demand as a whole, or at least this is what the FNB Second Quarter Estate Agent Survey told us about some estate agents expectations. The estate agent survey was conducted in May, prior to the World Cup, and agents expectations regarding near term property demand had already begun to deteriorate at that stage.
This decline in near term expectations is normal as the winter approaches, as a strong seasonal effect on residential buying exists, which is typically dampened in the cold winter months. However, the single most important factor being cited as a driver of near term agent expectations in the survey was the World Cup with some believing that it was a positive factor because it was improving sentiment in the country while others believed that many people were so caught up in "World Cup Fever" that they werent buying homes.
It may be a case of "the king is dead, long live the king", though, because after just giving the reader the impression that the World Cup was possibly insignificant for property around the time of its hosting, we nevertheless believe that it has huge potential benefits for the property market. However, you will notice that we are still talking in the future tense. We believe that its benefits will be felt in a very different way, in an "indirect way", and that these benefits will be felt in the much longer term, having little bearing on the apparently weakening short term state of the property market at present.
SA proved itself beyond any doubt
By most credible reports, the World Cup was a resounding success and appears to have far exceeded the expectations of a large part of the world that falls into the "Afro-pessimistic" category. From supposedly not having the infrastructure or the organisational capability for an event of this magnitude (in the eyes of many), it is now a proven fact that we do. There will no doubt still be a few cynics who use the few organisational mishaps that took place to still declare the tournament a failure, but from here on they will probably battle to find much of an audience.
Ironically, fewer tourists than some had expected may have been a blessing, making the event more manageable and thereby ensuring its organisational success.
The potential benefit for property lies in the events organisation success, which must surely have greatly improved the perceptions of many foreign citizens towards SA. This in turn has the potential to draw greater long term foreign interest to the country, be it in terms of doing business with SA, investing in the country or arriving as tourists. Should this prove to be the case, the long term pace of economic growth can be enhanced. This would imply faster employment and disposable income growth than would otherwise have been the case and therefore faster property purchasing power and property demand growth. Whats good for the economy is good for property.
The "economic performance" effect of the World Cup may go further, though, because by signing up to such events a government immediately puts the critical eyes of the world upon itself and in so doing increases the pressure on itself to deliver. This increased pressure may not have lead to the myriad of problems in the education, health and certain other sectors having been resolved, but one wonders if we would have been nearly as far down the road with transport infrastructure upgrades today had it not been for our self-imposed World Cup deadline.
However, for the full potential benefits of the World Cup to be realised it is important not to see the hosting of the competition as the "end goal" but as a means to an end, and the country now needs to harness this means to achieve the end goal. Otherwise, 2010 also has the potential to be of little benefit (and great financial cost). The Cup has opened a lot of new doors due to the change it has brought about in perceptions towards SA. The most obvious door to be opened is the one to the 2020 South African Olympics. Certainly, winning an Olympic bid is by no means a fait accompli but a successful 2010 must surely be a massive step towards achieving that goal with the International Olympic Committee likely to sit up and pay far more attention to an SA bid. Now it is up to a bid committee to take it forward, as it is for other entities across SA to move forward through the myriad of other new doors that may now have been opened, and to capitalise on the new opportunities. And their success or failure to do so will determine the ultimate impact that 2010 had on the SA economy and therefore on its property market.
Therefore, while it may sound strange to some, given that the 2010 event has come and gone, we believe that the positive impact, while potentially huge, has yet to be felt in a meaningful way and that the realisation of such potential benefits, via the economic impact, will depend heavily on SAs ability to capitalise on the future opportunities that the hosting of the World Cup may have created. The real 2010 work has only just started.
Article by: John Loos and Ewald Kellerman - www.iafrica.com