South Africans are settling in for a long and slow road to economic recovery. While the inevitable increase in pressure on consumers’ pockets will unavoidably filter down into the property market, experts remain cautiously optimistic about property’s performance.
“There’s no doubt that our country is in a tough financial position,” says Tony Clarke, MD of the Rawson Property Group. “However, it’s positive to see the government taking responsibility and looking to its spending to address the budget deficit, minimising the effects on the consumer as far as possible.”
When it comes to property, Clarke says there are several factors contributing to the market’s current resilience that will continue to bolster it through these tough times. Affordability is one of the biggest of these contributors, responsible for much of the post-lockdown boom in residential sales activity.
“Not only are property prices subdued thanks to a long period of slow growth, but interest rates are at record lows, and lenders are highly motivated, offering up to 100% loans,” says Clarke. “This has created a climate of affordability – particularly for first-time buyers – that we haven’t seen for many years.”
While the forecast economic contraction of 7.8%, average medium-term GDP growth of 2.1%, and tax increases of R40 billion over the next 4 years could eat into buyers’ income, Clarke says other conditions are likely to remain in buyers’ favour.
“Property prices should begin to rise in response to increasing demand, but we’re not expecting dramatic price growth for some time to come,” he says. “Interest rates will also likely start climbing from mid-2021, but at a very conservative rate that shouldn’t cause problems for buyers unless they’ve bought at the absolute limit of their affordability.”
There may also be a few new positive influences bolstering property’s performance if Finance Minister Tito Mboweni’s plans come to fruition as outlined in last month' budget speech.
“The R2.2 billion allocated to social housing and R96 billion for student housing will not only be a powerful community upliftment initiative, but it will also boost construction and provide new property investment opportunities,” says Clarke.
Less direct support will be felt from the additional 12 000 MW of new electricity capacity sourced from independent power producers, and the R12.6 billion allocated to employment initiatives.
“We hope these plans will put an end to load shedding, which could be detrimental to businesses trying to recover from lockdown, and improve unemployment, helping to get money flowing through our economy once again,” says Clarke. “This would boost consumer spending power and improve buyers’ ability to take advantage of favourable property market conditions, thereby supporting healthy growth in the sector.”
While Clarke is confident that the property market will weather the current challenges, a lot is also riding on the government’s ability to follow through on its economic recovery plans.
“Property has always been one of the most stable and secure investments to have during unpredictable economic times,” he says. “Current buying conditions will only make those benefits more pronounced. Those able to take advantage will not regret their decision as long as they’ve done their research, partnered with an experienced professional, and resisted the urge to overreach on their spending power.”
