The current uncertainty faced by South Africa’s property market is no cause for alarm, experts say. In fact, this phenomenon is quite common in real estate markets across the globe.
Greg Dart, director of High Street Auctions, said there is a rhythm to election cycles and this is 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’.”
These jitters can begin as much as a year before the elections and are often marked by reduced transactions as potential buyers and sellers take a wait-and-see approach.
With less activity in the market, property prices may stabilise or even decline slightly as demand wanes. Finally, investors might delay significant decisions or new projects due to potential changes in policies that could affect things like property taxes, regulations and economic stability.
Regardless of the outcome of an election, in most instances the real estate market will adapt and recover in accordance with the new political realities.
Dart emphasised the importance of South Africans voting for leaders that have the best economic interests of all South Africans at heart.
“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.”
Real estate investors were also jittery ahead of the US election in 2020, but the market rebounded strongly after it as low interest rates and economic stimulus measures restored confidence in the market.
“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.
“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.
IOL Business