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. 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. 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.