The current uncertainty faced by South Africa’s property market is no cause for alarm, experts say. This phenomenon is quite common in real estate markets across the globe.
Greg Dart, director of High Street Auctions, explains that there is a rhythm to election cycles well known to the global property market.
“The effects of elections on real estate markets vary, but some common trends have been observed in multiple countries, including South Africa,” Dart said.
“As an investor if you understand the cycle, it becomes less disconcerting – especially during election periods like we’re experiencing when the headlines scream words like ‘critical’, ‘pivotal’ and ‘game-changing’.”
Election-related jitters can start up to a year in advance, often leading to a slowdown in market transactions as potential buyers and sellers adopt a cautious, wait-and-see approach.
This reduced activity can cause property prices to stabilise or even decline slightly due to decreased demand. Investors might also postpone significant decisions or new projects, anticipating potential changes in policies that could impact property taxes, regulations, and economic stability.
Typically, the real estate market adjusts and recovers in line with the new political landscape, regardless of the election's outcome.
Dart stressed the importance of South Africans voting for leaders who prioritize the country's overall economic well-being.
“That’s not just a nice sentiment; we only have to look at polls from two countries last year to understand how important it is to vote.
“Voters in Argentina and Greece last year elected pro-market leaders, who introduced economic reforms that led to a significant market upswing. In Greece an MSCI gauge of Greek equities show them soaring 48% that year, while the index for Argentina rose 67% in dollar terms.”
Property investors were anxious leading up to the US election in 2020, but the market experienced a strong rebound due to low interest rates and economic stimulus measures that boosted market confidence.
“The South African economy has suffered in recent years, in large part due to bad policies, a lack of will to follow through, corruption and grid instability,” Dart added. “But through all of this, property has remained a stable long-term investment. That won’t change anytime soon," said Dart.
He said that investors need to understand election cycles and know that following the elections we will be seeing a rebound in the market – especially if the results are perceived to bring economic stability or favourable policy changes.
“Between that and the expected drop in interest rates coming this year, the prospects for the property market are more bullish than they have been for some time,” Dart said.
South Africans will head to voting booths across the country on Wedensday, 29 May.
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