Sat. Apr 20th, 2019

Elections 2019: What it might mean for South African property prices

With South Africa’s election date set and SONA delivered, personal finance gurus are making some predictions.

The post Elections 2019: What it might mean for South African property prices appeared first on The South African.

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Depending on where you are in South Africa, property prices are either ridiculous (we’re looking at you, Cape Town) or a bargain (looking at you, rural areas).

But most property experts agree that the market is currently favouring buyers, those who can afford it anyway.

Many have noted that the discussion around land expropriation and the looming elections could sway the market either way. Lightstone Property is the first company to stick its neck out and make a forecast. The data company has published projections for the South African property market and where it could go after the 2019 National Election to be held in May.

The projections offer three possibilities and consider South Africa’s projected growth rate, repo rates and inflation rates.

What elections could mean for South Africa’s property prices

It depends on a variety of different things, both before and after the elections. The “extreme” scenarios are less than likely, however, and most property experts predict that it could end up somewhere in the middle of the road, as has been the case for some years.

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Paul-Roux de Kock, Analytics Director at Lightstone, explains:

“As can be expected, the first quarter of 2019 will continue on a similar slow downward trend, within the constrained economic environment.”

According to De Kock the country will most likely experience a positive economic turnaround post-election, and certainty on economic policy and property ownership are likely to stimulate positive property market activity.

“In the run up to the national elections, uncertainty will most likely increase in the property market as the political and economic environment remains tumultuous,” says De Kock.

Specifically, in the residential property sector, debates on land reform is expected to continue to influence buyer confidence; however, De Kock highlights that there are early indications in the data that the property industry could still experience a robust recovery in 2019.

South African property market price forecast

When analysing the three different scenarios as modelled by data scientists at Lightstone, it is revealed that should the market follow the mid-road scenario, it will end the year in a similar position as 2018.

“On the positive though, should the economy fundamentally strengthen and significantly boost buyer confidence in the market, it could not only end in a high road scenario but has the potential to break through this forecasted percentage.”

The latter scenario was not explicitly modelled during the forecast but is based on intuitive expectations from a healthy performing emerging market economy.

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Photo: Lighthstone Property

The so-called luxury market is likely to be hit the hardest while the mid-market could continue to see growth, much like it did in 2018.

As one of the 2018 property success stories, this segment benefited largely thanks to upward mobility of the lower end affordable market as well as homeowners downscaling from higher value segments. This segment is set to stabilise and end 2019 at 4,7% with strong real value growth should the economy follow the high road scenario.

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Photo: Lightstone Property

But there’s hope for the economy, maybe

On Thursday, during his state of the nation address, President Cyril Ramaphosa vouched to grow the economy and get tough on corruption.

Growing the economy will be one of the most fundamental consider considerations for the property market.

“On the positive side, should the economy fundamentally strengthen and significantly boost buyer confidence in the market, it could not only end in a high road scenario but has the potential to break through this forecasted percentage,” de Kock said.

The post Elections 2019: What it might mean for South African property prices appeared first on The South African.

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