The worst is over on the homes front
Category Blog
The cloud of uncertainty that has been overhanging the residential property sector for way too long is at last showing small, but welcome, signs of lifting.
This is reflected in the fact that the value of Johannesburg / Sandton homes is the best it has been in the past 20 years. And it comes on the back of now stable interest rates – which remain the key building blocks of home values.
The fact is that South Africa’s recession has effectively bottomed out. Many of the bad circumstances and conditions that triggered it have seemingly run their course.
The property sector has become accustomed to them, and is now moving on.
And it is doing so on the back of some encouraging new economic data. For instance, headline inflation has dropped below 5% for the first time since November last year (from 5,1% in June to 4,6% in July).
This bodes well for a possible further cut in the interest rate.
While the current, clearly discernible, uptick in the homes market may well be modest at this stage, the turning trend is nevertheless encouraging. But will it be sustained – or, better still, intensified?
Elective conference outcome
That will depend on the outcome of the ruling party’s pivotal elective conference in December.
It will take place in the wake of one of the most uncertain socio-economic and political climates the homes market has faced since the rollout of democracy.
At best, it could reignite sentiment in residential property investment. Even if the outcome of the conference may not particularly favour the home sector, I believe that virtually nothing will stunt the market’s now emerging green shoots of recovery.
They come at a time when residential property has effectively been flat-lining since the property bubble burst almost a decade ago in 2008.
More recently, market sentiment has had to contend with:
- The dismissal of two Finance Ministers and a Deputy Finance Minister
- Constant reshuffling and redeployment of other Cabinet Members
- A struggling economy – with persistently low GDP and failing State-owned enterprises (SOEs)
- Credit Rating agency downgrades and resultant “technical” recession status
- Soaring unemployment - with joblessness now at a 13-year high, and
- A prolonged and damaging drought.
State capture corruption
Superimposed on that has been the now in-your-face issue of ‘State Capture’, together with the seemingly rampant corruption that goes with it.
At centre stage has been the analysis and unravelling of the so-called ‘GuptaLeaks’.
It is a phenomenon that has come from virtually nowhere to shine a bright light not only on the sheer magnitude of the current toxic process of ‘State Capture’, but also to unmask the people who have been complicit in driving it.
There is no doubt that ‘GuptaLeaks’ will go down in South African commercial and political history as a restorer of the nation’s integrity and a protector of the value of its citizens’ investment in real estate.
Author: Ronald Ennik
