Dr Andrew Golding, Chief Executive of the Pam Golding Property Group comments
When it comes to the upcoming election, there is generally agreement among market commentators that a crucial ingredient currently missing in South Africa is confidence – both business confidence as well as consumer confidence. It is hoped that a market-friendly election outcome will help create much-needed certainty and stability and go some way towards addressing the issues currently depressing confidence in the SA economy.
An incident-free election will remove the uncertainty which is currently weighing on the market, but further reform measures will be required for confidence to return to businesses, investors and households.
Even if confidence returns, the economy continues to grapple with rising petrol prices – which apart from being impacted by increased taxes, is the result of global developments (higher oil prices and a stronger dollar) which remain beyond the influence of local developments.
It is anticipated that, post a favourable election, the residential property market is likely to rebound after the election but in reality, only after the seasonally quiet winter months – so a rebound may be possible in the later stages of the year.
It is fair to say that the post-election environment is likely to be better for the property market – it is just a question of how much better it is. Will there be some market-friendly reforms introduced? Can SARS start collecting more revenue, thereby easing pressure on the already over-burdened tax-paying public?
A combination of a trouble-free election, further market-friendly reforms and an improved economic outlook are necessary for the property market to flourish once more.
Despite the subdued current pre-election conditions, it is worth noting that casting a general blanket over the market is often not advisable – as different provinces, regions, cities and sectors perform differently.
For example, there is a significant shortage of accommodation for students and of the right type of retirement developments in different parts of the country.
Looking ahead, and with household incomes likely to remain under pressure in the short term – with continued petrol price hikes (introduction of a carbon tax in June) – and with a large percentage of renters and buyers being newcomers to the market, the lower end of the market will, notwithstanding, continue to hold up well relative to other sectors of the market. Smaller sectional title properties will also perform better as a result (students, first-time buyers and down-scalers).
These sectors of the market would also be those that would benefit most from a rebound or turnaround in the economy. First-time buyers are typically most sensitive to prevailing economic conditions and are a strong potential source of demand for the market. In areas where market price corrections have improved the perceived affordability of a property, it seems time on the market is declining and buyers are showing a willingness to purchase.