Political stability bodes well for the property market

Monday, 08 June 2009
Political stability bodes well for the property market


The stable political climate since the recent elections is providing a foundation for the property market’s recovery.



“Markets, including the property market, do not like uncertainty and the peaceful and orderly re-election of the government, if viewed pragmatically, is a positive development,” says Gerhard Kotzé, CEO of the ERA South Africa property group.



“Perhaps the clearest indicator of this is the fact that the value of the rand has strengthened since the elections. Currencies always provide a barometer of opinion about the prospects of a country and clearly, investors see SA as having a stable business environment, which although impacted by the global slowdown, has weathered the storm surprisingly well.”



He says this is not to deny that the country faces serious problems. “The latest GDP figures show that we are definitely in a recession, predictions are that unemployment will reach official levels of 25% or more and exports are way down.



“Predictions are, however, that towards the end of 2009 the economy should start showing a flicker of life and likewise, the property market will, in all likelihood, begin to see the first ‘green shoots’ of a recovery.



“In the interim, on the positive side, SA’s hosting of international sporting events such as the Indian Premier League cricket, the Confederations Cup and the Soccer World Cup next year, has kept the mood in South Africa more buoyant than in most countries.



“Coupled with the nearly R800bn infrastructure programme announced by the government in the last Budget and the first glimmers of a recovery of demand for commodities, the indicators point to a gradual recovery of the economy in general later this year.”



As for property, he says that like any cyclical market it’s difficult to say that a bottom has been reached but that the latest ABSA house price review provides a pointer in this respect, indicating that real (after inflation) property prices fell by around 10% year-on-year in April.



“In addition, consumers are benefiting from declining interest rates and if the government can hold to a relatively stable course, they will regain their confidence in long term investments such as property.”

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