Dam drop = property drop

Various industries have already been affected by the water crisis in Cape Town – and experts think property could be next.

However, many believe that should Day Zero come and the taps run dry, any effects on the property market are likely to only be short-term.

This would still be significant as property on the Atlantic Seaboard and City Bowl has been on a steady increase in the last few years.

Day Zero has now been moved back to Monday June 4.

Level 6B water restrictions were also introduced from the beginning of February as a means to beat Day Zero.

Janine Myburgh, president of the Cape Chamber of Commerce, said that any drop in sales was likely to be short-term before the market self-corrects.

“There may be a bit of a hiccup but there are so many options to improve water use efficiency that making Cape Town a drought proof city is both possible and necessary. Already we have two private companies (Oceana and a hotel group) which are building their own sea water desalination plants and business and domestic consumers have invested in rain water tanks and grey water systems. It is likely that homes with tanks and grey water systems will become more desirable and therefore increase in value.”

Ms Myburgh added: “In the long-term there are options like large scale desalination plants that are now affordable and can compete with dam water. We can also expect Cape Town to increase its use of recycled water from 6% in a normal year to a much higher figure in the future.”

However, she said that 93 percent of their members had criticised the handling of the crisis by local government. However, on a more positive note, she added: “There is no reason why Cape Town cannot emerge from the crisis a stronger and better city with good water security.”

Ms Myburgh said that the industry likely to be most affected by the devastating drought would be agriculture. The industry, she says, is an important job creator and export earner for the province.

Deputy mayor Ian Neilson, admitted that should Day Zero come, they would possibly shut down the reticulation system in certain areas.

“This would have a negative impact on the economy in terms of both the short-term disruptions to businesses as well as to the long-term reputational damage to the destination.

“Property values would also likely suffer in the short-term, but should adjust once the crisis is over. However, we are doing everything possible to mitigate against this, and we firmly believe that Day Zero can and will be avoided as long as Capetonians keep up the trend of increasing their water-saving efforts.”

When asked about the criticism of the City’s planning, Mr Neilson said that research had gone into the plan and they would be rolling out more and more aspects of it in the coming months. He said they have also been engaging widely with numerous business associations and sectors around business continuity plans and many have already put these in place.

“We will be stepping up these engagements in the coming weeks so that we can reach as many businesses as possible. While we have endeavoured to deal with all eventualities in our plan, the truth is that a Day Zero scenario will be hugely disruptive to our residents and businesses. That is why every effort must be taken to avoid it.”

Buyers and estate agents will have to change their ways of thinking during this time of drought. This
is according to Craig Guthrie,
specialist attorney at Guthrie Colananni.

“When concluding sales during this time of supply uncertainty, both parties and the estate agents should carefully consider the implications. For example, whether the seller will be obliged to deliver the property on transfer a few months later in the same condition it was at the date of signing the agreement of sale. By this time, the garden and pool could be in poor condition and may even be permanently damaged, the bathrooms are no longer able to fulfil their function and the geysers may have burnt out.”

Lew Geffen, chairman of Lew Geffen, Sotheby’s International Realty, addded: “Now more than ever, it’s essential to appoint experienced agents and professionals and to pay careful attention when signing a conventional agreement of sale which often allows the purchaser to escape the agreement or sue for a reduction of the purchase price if the condition of the property deteriorates between the date of sale and transfer.

“Deal with these issues now to avoid dispute later and before the agreement is signed, both the seller and the estate agent should disclose the possibility of an interruption in water supply to potential buyers, especially those buyers who are not local and are viewing the property online. Failure to disclose this information could be a misrepresentation and result in the sale collapsing.”