select
|

How does sentiment affect the market?

“Consumer confidence can be best described as the degree of optimism that consumers have in the state of the economy relating to their personal financial situation. If consumers are not optimistic about the economy, they are likely to err on the side of caution and avoid entering the market, which is exactly what we have seen in the property market over last few years. On the other hand, if consumers are confident about an economy which in turn ensures them of the stability of their personal income, they are more likely to increase their spending. Consumer confidence is probably one of the most important indicators of the health of an economy,” says Goslett.

South African consumer confidence results are derived from individual interviews of an area-stratified prospective example of 2 500 households in metropolitan areas, cities, towns and villages throughout the country. The index represents 92% of the urban adult population and 53% of the total adult population.

With negative media reports and predictions from economists, there is no doubt that consumers confidence in the property market will be waning. Goslett says that although the Reserve Bank has kept interest rates low and steady over the last year to spur spending, many investors are still reluctant to get back into the market.

“Reports of a double-dip recession scenario in the US as well as other influences may push the consumer confidence in South Africa down, which would result in a delayed economic recovery,” says Goslett. He notes however, that while South Africa is not immune to foreign economic pressures, it’s recovery should be much quicker than its international counterparts, due to limited foreign exchange exposure.

Consumers represent approximately two-thirds of expenditure in the South African economy, which is why a drop in confidence and spending may challenge economic growth. According to the First National Bank, many consumers expect the economic performance to deteriorate and some of these foresee that this will also hurt their own finances over the next 12 months.

According to the FNB/BER (First National Bank/Bureau for Economic Research) consumer confidence index, during the third quarter of 2011, consumer confidence dropped from 11 in the previous quarter to a two-year low of four. In the second quarter of this year it had improved to 11 from 9 in the first quarter. “While the confidence level dropped in the third quarter, it is still a marked improvement from the numbers seen in the middle of 2008, where confidence levels were at -5, which points to the fact that we are a long way from where we started at the beginning of the slump,” says Goslett.

“What investors should remember is that while we can’t accurately predict when it will be, the property market will recover and has in fact largely recovered from the bottom of the slump already. There are still a few hurdles we still need to overcome but the market is poised for recovery.  Although consumer confidence could fluctuate from quarter to quarter, property is still an asset that has continued to outperform other asset classes over the long term. More money was made by investors buying property in slumps and selling in booms, then those who bought and sold in a boom,” concludes Goslett.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Nov 2017
      As the holiday season approaches, most of us are counting the days until that year-end bonus hits our account. There’s nothing quite like a little bank balance booster to get us in the holiday spirit.
    • 23 Nov 2017
      The Adelphi Centre (now entitled “ARTEM") in Sea Point, Cape Town, is being extensively renovated, and once complete will offer an ultra-luxurious galleria style shopping centre unlike any other seen on the Atlantic Seaboard or in Cape Town.
    • 23 Nov 2017
      If you are looking to sell your home in today’s real estate market, there are certain things that you need to include both inside and outside your house. Today’s generation of home buyers is looking toward a more eco-friendly, energy and water conscious home, and if your house stands out then you are more likely to be able to sell it.
    • 22 Nov 2017
      Most people know of the Community Schemes Ombud Service (CSOS) and that levies must to paid to fund its operations. In this article the experts at Paddocks will address some of the issues that are causing confusion.
    • 22 Nov 2017
      While sales have noticeably slowed in most sectors in most Cape town suburbs, the security estate sector in Constantiaberg has bucked the trend by remaining buoyant, with sales by August this year already surpassing total sales in 2016.
    • 22 Nov 2017
      The end of the year is fast approaching, and so are all the travellers, tourists and holidaymakers. For those who live near or own a property in a holiday-hotspot, the festive season also brings with it an abundance of short-term rental opportunities. Its a great way for property owners to make a few extra rand for their own holidays or to put towards their savings.
    • 21 Nov 2017
      The buying process is over, and the moving truck has delivered your household goods to your new property. Now it’s time to unpack and turn your new house into a home.
    • 21 Nov 2017
      When an offer to purchase a property is signed by both buyer and seller, this constitutes a binding agreement or “Deed of Sale” between the two parties. However, in most cases the “standard contract” might not be enough to cover all the specifics pertaining to the sale. The agreement may require some additions or alterations to clauses, which needs an expert hand in the drafting of such
        
    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