Getting the Real Estate GINI back into the bottle?
Unlike the genie Aladdin discovered by rubbing his lamp, the GINI coefficient was developed by the Italian statistician, Corrado Gini. It is commonly used as a measure of inequality of income or wealth.
The GINI is portrayed as a number between 0 and 100. Simply put, the most unequal society will be one in which a single person receives 100% of the total income and the remaining people receive none (G=100); and the most equal society will be one in which every person receives the same percentage of the total income (G=0). So, South Africa aims to get number as low as possible – to get our GINI back into the bottle!
Before we reveal what number that is, it may be good to understand how income inequality is measured. No statistical measurement can accurately determine the true situation among diverse demographic segments in specific regions within our 9 provinces. In our rural areas, for example, people may have income in other forms than money through subsistence farming, cattle or bartering. The value of these incomes is difficult to quantify. Other government-subsidized benefits such as medical care for children, “free” education and RDP housing all have a value that are not taken into account when determining income inequality. South Africa is by no means destitute. Real poverty – surviving on less than $1/day – is found in the slums of Calcutta, the refugee camps in Sudan and the villages in Bangladesh. Even recipients of government grants in our country receive almost 5 times that amount!
South Africa’s GINI is 57,8 at present and slowly, very slowly moving in the right direction. Scandinavian countries reign supreme with GINI’s as low as 23! Countries with a GINI above 50 include other emerging market economies including a number of South American countries. Notably, most African countries supply no data at all.
The past 16 years of democracy in SA have not had the miraculous results that many had hoped for. A positive trend however, has been the increasing number of previously disadvantaged individuals (PDI’s) who are realizing that buying property is a basic wealth-building exercise. Just 5 years ago, when our GINI was 65, the majority of properties, in fact 60%, were bought by whites. Now in 2010 the buying demographic is more representative with 56% of properties bought by non-whites.
While the GINI coefficient measures inequality of income, it does not measure inequality of opportunity. More and more PDI’s are now making a career in the real-estate environment as estate agents, bond originators and as valuers. It will be some time before the property-purchasing patterns match South Africa’s rainbow demographic proportionally, but positive strides are being made. RDP housing has been a remarkable injection by government in its efforts to alleviate poverty. While corruption and poor-quality workmanship continue to plague this sector some estate agencies have jumped to market these township homes with success.
Empowering people through property ownership will contribute to reducing income inequality as they join the ranks of buyers/sellers in real-estate transaction cycles. No magical solution exists for our troubled housing sector but savvy professionals are using online-marketing tools such as Property Genie and CyberProp, online property portals like SAPTG, and mobile predictive-pricing such as EVALUATE to offer clients of all race groups the very best service.
While we may never get our GINI to zero - entirely in the bottle - there is no reason why the wealth of the country cannot be shared by those who are prepared to buckle down, embrace solid work ethics and snub the gravy-train.
Dieter Deppisch
Head: Property Data Research, Knowledge Factory