Future Imperfect

So was 2010 a year of two halves?

Leadership requires you to look round corners and predict the future. Some of the greatest business decisions ever made were executed by those who spotted a trend, made a call and focused their resources on what lay ahead. Conversely, the greatest mistakes in business were made by predicting the wrong trend and heading in the wrong direction. In the trend prediction game, invariably, you win some and you lose some.

The good news is that many of my predictions for 2010 were spot on. In December last year I wrote my annual predictions where I stated that 2010 would be a tale of two halves; pre and post world cup. And so it proved to be. Our first quarter results were the highest recorded in our two decade history as buyer sentiment was heightened by the upcoming world cup. I foresaw a successful world cup, “The first half of the year will see our country showcasing itself to a global audience. Despite high levels of crime and a still shaky economy, South Africa will prove the skeptics wrong.” Bingo!

I predicted, in stark contrast to the usual property pundits, that in the first half of the year the market would experience larger property liquidations and insolvencies than ever experienced before in South Africa. That was also spot on. In fact, in December last year, unreliable Stats SA said that insolvencies were dropping due to lower interest rates. Not me. I said that interest rates would not positively affect liquidations, and in 2010 we saw the highest value liquidated property stock ever brought to the market.

I also said that we will definitely see more commercial property hitting the distressed auction floors. True. This year saw more commercial property than ever before come to auction. I believed that the commercial property market would remain fundamentally sound through the year, and if you look at the demand for well tenanted commercial property, together with a particularly sound listed commercial property sector, this has proven to be the case. I predicted that any liquidated commercial properties would be snapped up by predatory investors. That proved true too if you look at the many liquidation sales over R20 million that we concluded. These were easily sold to investors – who may not appreciate being called predators.

Last year I was worried about the distress of large tracts of vacant development land, incomplete developments and more golf estate developments, which were under severe pressure. Again, spot on. This year we sold tens of thousands of hectares of vacant land, coupled with a few golf courses to boot.

Many estate agents, developers and even a few property economists predicted a glory period for property sales after the world cup but not me. I said that the second half of the year would be more challenging, that house price growth would be limited, with complications left by the last decade’s property boom still lingering. Again, if one looks backs at the year this prediction turned out to be right.

On the auction industry, I got the broad prediction right. I felt that more new industry entrants would join an increasingly competitive space. Despite one or two high profile closures, many new auctioneers opened shop during the year and are plying their trade in every province of the country as they look to the auction industry as a growth area.

Any temptation to brag about Nostramdamic tendencies has to be tempered by the prediction I got wrong; I said that the world cup was likely to cause a bounce in high value residential properties. That was a big miss. In fact high value residential property was the worst performer in the post-world cup property market. In my defense I did say that the world cup would not be a magic pill to quickly relieve the downturn.

So maybe 2010 was a little predictable and one didn’t need to be a brain scientist to logically apply future scenario planning. In two decades of looking into the business future, I’ve had my share of hits and misses. Hopefully my predictions for 2011 will hold true and bring me a little closer to reliably seeing around the corner with 20/20 vision.