The property market in South Africa will benefit significantly from the successful formation of a Government of National Unity (GNU), according to property experts.
The May 29 elections caused a lot of anxiety among both consumers and investors, according to Stephen Whitcombe, the managing director of Firzt Realty.
Now that the tide has settled and the GNU has been broadly accepted, Whitcombe foresees that interest rates may even start to go down earlier than expected.
Berry Everitt, CEO of Chas Everitt International said that the GNU is a courageous move that is already being rewarded by the financial markets.
He noted that the value of the rand jumped up by 0,5% in one day and gained 3% in a week, compared to an average 0,4% decline among other emerging currencies.
Low interest rates
Whitcombe argued that lower interest rates would undoubtedly boost the property market.
These lower interest rates would make home ownership more affordable and easier for prospective buyers to qualify for a home loan, he explained.
“However, to get there, we need increased investor and consumer confidence in the future of the country and its economy, and the renewed confidence created by the GNU agreement was indicated by a 1,6% jump in the JSE Africa All Share Index last week and a 3% increase in the value of the rand,” Whitcombe said in a statement.
The rand could also strengthen
Whitcombe also added that if this renewed confidence continues, the rand could strengthen against global currencies.
“If this continues now as we expect, the rand will strengthen further, the inflation rate will fall and the risk of imported inflation will decrease, all of which may well encourage the Reserve Bank to start cutting rates within the next few months and making life easier for millions of SA consumers, while hopefully lifting economic growth and stimulating job creation,” he said.
Consumer confidence
In addition, Everitt said that the property industry will see a large amount of capital inflow over the next few months as a response to the announcement of the GNU, the re-election of President Cyril Ramaphosa and the political and social stability that investors crave.
“This inflow will further strengthen the rand, lower inflation and make it possible for the Reserve Bank to start cutting interest rates, maybe even sooner than expected. And that will of course give the real estate market a huge boost by immediately making home ownership more accessible to prospective buyers,” he said.
Everitt said that the GNU agreement will provide both renewed consumer confidence and increased affordability, both of which are key to the full recovery and growth of SA’s property market.
IOL BUSINESS