select
|

Will the rolling blackouts have an impact on the property market?

According to leading financial analysts and economic experts, the ever-growing risk of electricity supply disruptions could affect the residential property market in 2015. While it is expected that house price growth will be marginally higher this year than last year’s 7.1%, electricity supply constraints are likely to have a negative effect on the demand for property.

John Loos, a household and property sector analyst at FNB, pointed out that both the output and performance growth of the property market would be negatively impacted by electricity supply restrictions. He notes that the property market is largely driven by the state of the economy, on which the power crisis is having a devastating effect as with many businesses are unable to trade during blackouts.
 
President Jacob Zuma told South Africans at his State of the Nation Address that resolving the energy challenge is on the top of government’s list in order to ignite economic growth. He pointed out that the current energy constraints are a serious impediment to the economy experiencing any growth in the future. While the short and medium term plan involves improved maintenance of the Eskom power stations, the long term plan would involve finalising the government’s long term energy security master plan. He said that as a priority government would stabilise Eskom’s finances to enable the utility to manage the current period. To do this the government will honour its commitment to give Eskom around R23 billion in the next fiscal year.
 
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, the electricity fee increases that have filtered through to the consumer will have an impact on both existing homeowners as well as those consumers who aspire to purchase property during 2015. “Despite lower oil prices, the increasing electricity tariffs will add further strain to consumers who are already struggling with high debt-to-income ratios and we could see this impact on the number of consumers who will be able to afford to buy a property. The electricity crisis will add to the cost of running a household as will any new increases in electricity prices that Eskom has requested,” says Goslett. “Even buyers who have the financial means to purchase a property might delay their decision to make the long term commitment of owning a property at this stage. The increased cost of living could have more consumers adopting the ‘wait and see’ approach when it comes to the property market.”
 
Goslett says that the higher cost of running a household could also result in a trend emerging where more buyers opt for smaller, more manageable and cost-effective properties. “Buyers are likely to find homes that won’t be as expensive to run and they may also put a higher emphasis on homes with green features or generators. Homes with alternative power sources such as solar panelling will be highly sought-after among property buyers in the years ahead,” says Goslett.
 
While the electricity crisis may have a negative impact on the property market as consumers hang back, this will increase the demand for rentals as consumers put their homeownership goals on hold. Although this is good news for landlords, the increased demand and higher utility costs could result in rental prices increasing exorbitantly over the next year.   
 
There is also concern that the deteriorating power situation could keep foreign investors at bay, with the erratic power supply impacting on foreign buyer sentiment. “The fragile situation with the power supply is causing concern among businesses who don’t want to risk having a power problem that would impact their productivity severely,” says Goslett. “This sentiment is shared with many local investors and property owners, many of whom sold and emigrated after the start of load shedding in 2008. Continued power problems could potentially lead to a further drain in skills and investment capital.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 17 Jan 2018
      While the current property market may still favour buyers, it doesn’t mean that they shouldn’t be well prepared before putting in an offer to purchase.
    • 17 Jan 2018
      Lightstone lists Blair Atholl as the most expensive suburb with an average house price of R11.2 million, followed by Westcliff (R10.5 million), Dunkeld (R9.3 million), Sandhurst (R9.1 million) and Inanda (R7.2 million).
    • 17 Jan 2018
      As it currently stands, there are four main ways in which a home can be bought in South Africa, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who adds that deciding in which legal entity to purchase the property is not a decision that should be entered into lightly, as each has its pros and cons.
    • 16 Jan 2018
      The start of the new year is symbolic of new beginnings. A good time to take stock of one’s possessions as well as how necessary they actually are. However, seeing as the process may appear daunting – a plan goes a long way.
    • 16 Jan 2018
      The Western Cape is still in the throes of a severe drought and many households have to adjust the way they use and save water. It is a little more complicated in sectional title schemes, however, as it is not that easy to implement grey water systems for multiple users and it is also difficult to monitor water usage accurately if there are no separate water meters
    • 15 Jan 2018
      In ideal rental situations, when a lease is signed the tenant will stay for the full duration of his lease without any complications and the landlord will uphold his obligations, creating a win-win situation for tenant and landlord.
    • 15 Jan 2018
      The Atlantic Seaboard’s housing market has stoically withstood the brunt of the growing economic and political instability, consistently achieving double digit growth way above the national average, however, in 2017 South Africa’s most resilient market finally began to yield to the pressure.
    • 15 Jan 2018
      Sectional title insurance can be a little confusing and, as a new owner, you may be tempted to just assume your body corporate has you covered. While this may be the case, understanding the extent of your coverage and your personal liability is the only guaranteed way to protect yourself against potentially costly oversights.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK