A Property Market as Resilient as its People
Category Press Releases
Alan Paton of 'Cry my beloved Country' fame once quipped "South Africa is a place where you despair on Monday and hope on Tuesday." Never was this saying more fitting than in the middle of July. When South African's broke the back of an artificially induced snap of looting, violence and racial tension. People came together as the Rainbow Nation this country had always hoped for and collectively clean up the destruction that had been caused.
One month on from that tumultuous time and most things are the same as they were pre-looting. This return to normalcy, albeit a surreal COVID-19 reality, is echoed in the property market with trade remaining as strong as it has been since the interest rates were dropped to a 50-year low in the second quarter of 2020.
From HUNT Properties' perspective, we have actually seen an increase in positive sentiment in the market, with a 25% increase in the number of enquiries and transactions in the 30 days post the Unrest. This is significantly higher than the stats pulled from 30 days prior to the unrest. The increase in transactions have been across the board in terms of price ranges, types of properties, gated estates and suburbs.
Sentiment does, however, blow hot and cold, especially in South Africa, where, to paraphrase the aforementioned Paton quote, you could despair on a Monday, hope on a Tuesday and be "gatvol" by Wednesday. Below are some fundamentals that reveal a deeper explanation as to why the property market has remained resilient after the Unrest and that this robust market could continue.
Consistent growth
According to the Lightstone Residential Property Index Annual house price inflation is at a 5 year high, standing at 5.07%, with coastal properties standing at a very respectable 8%. This has been driven largely by the prime lending rate standing at an all-time low of 7%.
Low interest rates
The interest rate remained unchanged at the last South African Reserve Bank Monetary Policy Committee Meeting on the 22nd July 2021. The currently low inflation rate, the Consumer price index stood at 4.6% in July 2021, would indicate that interest rates could remain this way for the foreseeable future.
Junk Status no longer the elephant in the room
The property inflation rate previous peak was in June 2016, which was shortly after Nhlanhle Nene was fired as finance minister in December 2015. This infamous event known as Nenegate, lead to a series of events culminating in the country seemingly indefinitely facing an imminent downgrade to 'junk status' by the international rating agencies. This prolonged uncertainty caused a massive dent in buyer confidence until the inevitable happened and the country was downgraded in April 2020. When buyers realized the sun still rose and set and everything remained relatively normal after the worst-case scenario had happened, certainty and therefore positivity returned to the market.
A history of violence and recovery:
South Africa history is riddled with spurts of violence. The 1914 Maritz rebellion, the Bulhoek Massacre of 1921, the Rand Rebellion of 1922, the Durban Riots of 1949, the 1960 Sharpeville Massacre and the Soweto Uprising in 1976 are dreadful examples of our country's complicated and brutal past. We have survived those events and economically thrived, as we did post-Apartheid. The words of historian CW de Kiewiet, in 1943, still hold true today: "SA progresses through economic windfalls and political disasters".
Civil unrest is not a South African problem:
Civil unrest is also not limited to our country or perceived third world countries either. Take the recent BLM protests or the United States Capital attack for example, or the slightly less contemporary example of the 2011 England Riots. Both Britain and the United States had booming economies and property markets post these unrestful events.
Green shoots of Progress:
There is evidence of our government fighting both corruption and progressively implementing structural changes in how we manage important state owned enterprises as well as providing a boost to important infrastructure. These examples come to mind; The incarceration of Ex-President Zuma, the resignation of Zweli Mkhize, the dismissal of Ace Magushule from the ruling party, the wrapping up of the Zondo Commission as well the country signing an extradition treaty with the UAE to return the Guptas to face the music. All these are positive signs of progress.
More positivity emanates in the form of a local private consortium, with airline expertise, taking a 51% stake in SAA, Transnet seeking private partnership in the country's ports, with a R100bn expansion of the Port of Durban in the pipeline and the imminent major upgrade of the N3 highway - all indicators of the country getting back on its feet.
The reality is that people are investing in a wide variety of property in South Africa, which is especially true in Semigration hotspots such as the Western Cape and the KwaZulu-Natal's North Coast. The statistics back this up and there is substantial evidence indicating that this buoyant market will continue. We are resilient, our history proves that. It seems that our faith matches that resilience as we are still readily and actively investing in our beautiful country. Long may it continue.
Author: Ryan Hunt
